How one homeowner saved big by buying instead of renting

Buying a home might seem like a huge expense, so it's easy to convince yourself that you'll be stuck renting for the rest of your life. But in many cases, getting a mortgage can turn out to be a lot cheaper than what you would spend paying rent month after month.

In fact, a recent study by real estate site, Trulia, shows that "homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas." In fact, buying a home is about 38 percent cheaper than renting, according to the study.

That was certainly the case for homeowner Caryn Henderson, who says she always knew she wanted to buy a home sooner rather than later.

"I realized early on after graduating from college that paying rent was basically the same as throwing my money away," she explains. "After 10 years, you've paid your landlord the equivalent to a massive down payment for your own place, and I always thought that was crazy."

Henderson admits that there are cons to owning your own place, such as maintenance and repairs. She also adds that buying a home takes away your mobility. "When you're a renter, you can just pack up and move at any time." But for her, the benefits of homeownership outweighed the drawbacks.

Henderson, who is 35, earns a $43,000 salary as an elementary school teacher in Fort Lauderdale, FL. "I did wonder whether my salary would be enough to qualify for a mortgage, but in the end it worked out fine," she says.

One reason Henderson qualified is because she has a decent credit score of 670. "I'm aware [my credit score] could be better, and I'm working towards paying off my student loans and improving my score so I can eventually refinance and get a lower interest rate."

Before Henderson bought her current apartment, she rented a one-bedroom, one-bathroom condo for $1,060 per month. "Prices in Fort Lauderdale are ridiculous," she says. "My apartment was very cute and well-located, but it was a lot of money to be paying for something that would never be mine."

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Saving for a Down Payment

Even though her rent was high, Henderson says she worked on saving as much money as possible for five years before she made the jump into buying her own home.

"Some months it was just a few hundred dollars. Some months it was close to $1,000," she explains. "I cut corners in so many ways - I now laugh about it when I remember."

For example, Henderson says that for an entire year, she only bought clothes at thrift stores or garage sales. She also planted a tiny herbal garden (including mint, rosemary and basil) in her balcony so she didn't have to buy condiments and would regularly buy food from the discounted section of her local supermarket.

"Those were the foods set to expire within a day or two, so I would just go home and freeze them," she explains. "Sometimes I saved as much as 70 percent off the original price by shopping that way."

Henderson also took odd jobs here and there, such as walking her neighbors' dogs on evenings or weekends or tutoring students in math after work, earning anywhere from $15 to $35 an hour - and saved every penny.

"After five years, I had almost $34,000 in savings, and I was ready to buy," she explains.

Finding Her First Home

It didn't take long before she found the right place, thanks to the help of a local realtor. "Apartments are expensive in Fort Lauderdale, so I thought it would take a while before I got something, but within two weeks, my realtor had found four condo apartments for under $200,000, which was the amount I was pre-approved for."

As for location, all four properties were within 15 minutes walking distance of where she used to rent. "I told my realtor anywhere within 30 minutes of my old apartment would work, so she did great," Henderson explains.

She eventually chose a two-bedroom, one-bath 790 square foot apartment for $169,000 and signed the papers in April 2012. The apartment is part of a small complex and comes with amenities such as a heated swimming pool and a small gym.

"Plus, the condo was being sold completely furnished, so I didn't have to spend any extra money to move in," Henderson says.

Saving Money through Homeownership

After putting down every last penny of the $34,000 she had saved, Henderson had to get a loan for $136,000 to cover the apartment. To cover her $2,000 closing costs for the loan, she borrowed money from her brother and was able to pay him back within four months.

"I chose a 30-year fixed loan, because I liked the lower monthly payments," she says. At an interest rate of 4.31 percent, her monthly payments (which include $42 in homeowner's insurance and $141 in property taxes) comes out to $858 per month. "That's $202 less than I used to pay in rent every month," Henderson says.

So what is Henderson doing with the $200 difference between her old rent and her current mortgage? She's investing it in stocks.

"My brother works as a stockbroker and has been trying for years to get me to invest," Henderson explains. "My plan is to do that for the next few years and then see where I stand." Depending on how well she's doing, Henderson says she might consider continuing to invest or she might take some of that money and put it towards paying off her mortgage.