Own vs Rent
Mortgages are affordable – Even though rates have spiked about 1% over the past year or so, at a 4.5% interest rate, 30-year mortgages are still extremely reasonable. This is significant because in many cases, it is actually cheaper on a monthly basis to own a home than rent. In the market you are currently renting in, $350,000 gets you a relatively nice three-bedroom home, with a mortgage payment of approximately $1773.40. Of course, this can be less depending on the down payment. Also, there are taxes and insurance to consider. However, this same house is now commanding $2,700 per month in rent. Even if rates go up a full percentage point next year, the monthly payment at 5.5 is still under $2000.
Your life, your way – Want to get a new family pet? Go for it! Want to landscape your yard, put in a pool, add on another bedroom, or remodel your kitchen? These are some things that are out of the question in virtually any rental situation and can be as easy as applying for a building permit if you own your own home. Many of my friends who rent their houses are stuck with kitchens that look like something from a 70s TV show, and their landlords seem to be in no rush to update anything. The freedom to make your home truly your own is one of the best reasons to buy a house. If you’re a dog lover, finding a rental that allows pets can be a nightmare. And if you are a smoker…well, you know…
Credit – This may seem somewhat unimportant, since most people in a position to buy a house already have very good credit. Regardless, a mortgage will certainly report to the credit bureaus, and a rental company will almost certainly not. There are few items on a credit report that demonstrate financial responsibility and general stability in life better than a long history of on-time mortgage payments.
Equity – Having equity that can be tapped into if necessary is a big plus for homeowners. Having equity in your home is not only important to help pay emergency expenses, home improvements, or your kid’s college tuition, but simply having the equity available to you makes it much easier to get a loan for almost anything else. If you have, say, $75,000 in home equity, a bank will feel much better loaning you $20,000 to buy a boat than if you were renting an apartment.
Not an investment, but still much better than renting for your financial health – Some say that a home is not a good investment, at least in the traditional sense of the word. However, it is still exponentially better for your long-term financial health than being a lifelong renter. Let’s say you buy a $200,000 house, and you put $40,000 down. This would make your mortgage payment $810.70 for 30 years at a 4.5% interest rate. (5% down or $10,000 gives you a mortgage payment of $962.70). Of course, you have real estate taxes and insurance, but with the average $200,000 home renting for $1700 per month, at the end of the 30 years, at least you own the home free and clear, and hopefully it’s appreciated significantly in value. If you pay the same amount in rent, after 30 years, you’ll have paid a total of $291,852 in housing payments. This is also a glorified scenario, as rental rates usually rise over time, making your actual total even more. At the end of 30 years, you’ll have absolutely nothing to show for all of the money you spent.
So, while owning your home only provides 3%-5% annual returns on a long-term basis, this is still far better than paying out hundreds of thousands of dollars and not building any equity whatsoever.
Homeownership is still the way to go! For more information, call Wendy Chercass at 954-964-2559 or email Wendy@ATeamFlorida.com or visit us at www.ATeamFlorida.com.