Renting versus Buying a home | Housing | Finance & Capital Markets | Khan Academy

NARRATOR: In this video to us I want to set a framework for thinking, whether to rent or buy an apartment. I hope that after watching the video, That answer to whether you prefer rent or buy is not easy. For completeness, I own a house and I bought it for a variety of reasons, some were emotional, some maybe economic. It depends on your personal context, where you are in life, and in which part of the world you live, and what the economy is currently doing, and what are the prices of rents and housing. Perhaps the video will give you a framework for at least how to think about it. Let's say this house is on the market for rent 1,500 per month. 1,500 per month, which is the same as 18,000 per year. 18,000 a year is one option you have. Let's say the market is for sale the same neighboring house, and you have the opportunity to buy it. Let's say this house is for sale for $ 400,000.

You don't have $ 400,000 and you will have to borrow some money. You saved 100,000 on down payment. Deposit 100,000. You will have to borrow the rest. You'll borrow 300,000. Now, a traditional mortgage that is for a fixed term, maybe 15 years, maybe 30 years. Every month you pay for a mortgage account, some of that goes with a traditional mortgage on loan repayments, and something goes on interest payments, and the rest loan repayment. For example, let's say you pay a mortgage payment of 1,800 monthly. Soon, interest may be disproportionate. It could be, say, 1,500 per month on interest and $ 300 actually in loan repayment, to repay this $ 300,000 loan, and after the loan is repaid at the end of your mortgage term It can go another way where you pay much more in installments every month. Maybe it's 1,500 and the interest, .

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