To Rent or To Buy?

Progress has been slow and steady in my personal economy. But I’m about to shake things up a bit with the purchase of a home. I have a special account where I’ve been saving and the money in that account has been earmarked to cover all expenses associated with the purchase of my home.

The account is not included in my updates because it’s an old account (I have no more secret money stashes) and this blog is about starting from scratch and seeing how fast I/we can grow our money. Any money in the account that I don’t use toward the closing, will be used to pay down my credit card and/or distributed among the accounts listed in my financial update. I will let you know the exact amount, if there is any, that I have left to distribute.

Once this purchase is finalized I will have a budget that is basically set in stone. What I’ve done so far is created a worse-case scenario and built my saving/investing budget accordingly. If I’m remotely accurate I will not have to make any adjustments to my current savings rate. My discretionary spending might be tight but I already keep that artificially tight.

I’ve gone back and forth several times about owning vs. renting. I owned a small condo before and sold it for a nice profit and I’ve been renting ever since. Prices to rent or buy continue to be extremely high in the NY/NJ tristate area. But I’ve decided to bite the bullet and build equity for myself instead of someone else. If I’m honest, I know that the reason for my hesitation is parting with the money that I’ve accumulated for the purchase. Having this money brought me an extra layer of security, it was the extra fluff in my pillow at night.

The money currently sits in a Capital One money market account that pays 1.10% interest. When the account drops below $10,000 the interest rate will drop to 0.60%. When this drop occurs, I will close the account and redirect the automatic deposits to my AMEX savings account, which pays 1.05% with no minimum balance requirement to receive the maximum rate of interest.

I will not sever all my ties with Capital One, because they continue to have some of the highest interest rates for their investment products. I will maintain my taxable stock account and, in the future, I plan to purchase CDs with them.

When I finally close on my home, I will share all the ups and downs of the process. It is my hope that you will fly across all my stumbling blocks.