Buying Homes for College Students

According a recent survey, more than 90% of college students live on campus in their Freshmen and Sophomore years. Part of the reason for this huge percentage is that most colleges make it mandatory for incoming freshmen to take up housing on campus. If you wish to move to cheaper off-campus housing, again colleges have a minimum number of credits you need to have before moving out.

Why would Students want to move off-campus?

The biggest reason $$$. According to the College Cost Book, a publication of the College Entrance Examination Board, the cost of room and board runs anywhere from about $4000 a year to about $14000. The higher the cost of room and board, the greater the incentive to find a cheaper alternative. Moreover, some colleges campuses have no housing, others have little and still others have space that may be noisy or unsatisfactory in other ways. And the prospect of tax benefits, especially for parents in a high income bracket helping out their college bound children, may also be a consideration.

Another benefit of having your home is that you need not worry about pesky landlords, telling YOU how neat your house should be, can or CANNOT look etc. You can decorate or paint your house, whether it is bright Pink or the colors of your Favorite NFL team without having the landlord freak out on you.

Assume you are interested in a $60,000, one-bedroom cooperative apartment. A 25 percent down payment, would require the buyer to come up with $15,000 in cash. Assume that the developer is helping with the financing, and a $45,000 mortgage can be obtained at 12 percent interest. Monthly mortgage payments will work out to $463 on a 30-year loan. Add $300 a month for maintenance charges and the total comes to $763.

Maybe another student can share the apartment and pay some rent. If the other student paid $400 a month, the cost to the buying student would be $363 a month.

Tax breaks also become an important calculation. Initially, all the mortgage payment, and perhaps as much as half of the maintenance - for a total of $613 - would be tax deductible. Hence, in a 50 percent tax bracket, the parents would have a $306 tax deduction. The net after tax cost of the unit is $457 a month ($763 minus $306).

Advantages of buying a Home instead of paying Rent

For a lot of first time buyers, buying a home is not a hard task to deal with. While most of the first time buyers have their parents on the lease, most of the Students qualify on their own for their own homes. You might not even need a co-signer if you can work something out with your real estate agent and mortgage broker.

Again, think about it. You might be paying $600 - $1000 something in rent if you stay off campus. Instead of paying the same amount in rent, you can pay the same amount for your mortgage payments. You need to think about this option because a home is something that will appreciate in value. After school is over, you can sell it off and maybe even get back the money you paid for your college education or you can use that money in case you are moving to make a down payment on another home.

Another advantage, say you have a 3 bedroom house. Assuming you pay on the high end of around $1000/month on mortgage, if you bring in 2 other room mates who would jump at the chance of living in a house for $500, you can basically live for free.

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