Misunderstanding The Advantages of Buying A Home Can Cost You
The current state of the real estate market has some ongoing trends of low inventory, low interest rates and rising home prices. With these elements out there some people feel that it may be expensive to buy a home these days and think that it is better or more affordable to keep renting. However, it is important to dive deeper into the subject and examine a few angles to really see if it is more affordable to buy or rent. Here are some compelling facts.
Income To Monthly Payment Ratio
Recent studies from the Urban Institute show that renters pay a larger percentage of their incomes on rent than owners on their mortgages. The report explains: “When we look at the median housing expense ratio of all households, the typical homeowner household spends 16 percent of its income on housing while the typical renter household spends 26 percent. This is true, you might say, because people who own their own home must make more money than people who rent. But if we control for income, it is still more affordable to own a home than to rent housing, on average.”
Renters Don’t Have As Many Options
Everyone has a living expense whether it is a mortgage or rent. With renting you will never get any of that money back, where with a mortgage it can act similar to a forced savings account as you build equity over time which will put you in a better position in the future. You can almost look at buying a home as a similar investment to say a stock or similar.
Mortgage Payments Don’t Rise Like Rents
When you are renting there is no telling how much your rent may increase year after year or for that matter if your landlord will even offer a renewal option. It is quite customary for landlords to increase rents either every year with a small bump or every few years with a larger one. However with owning a home with a fixed rate mortgage this is not the case. While your property taxes and insurance can increase, your principal and interest will not change.
Waiting To Buy Could Cost You
Owning a home is one of the biggest keys to financial success for most as it is often one’s largest asset. As building equity takes time, waiting to jump in the game can cost you money. Get started today using property to facilitate your financial success. If you have any questions about what is happening in the local market these days, please feel free to reach out. I am happy to discuss!