Buying a house in the US is now 33.1% cheaper than renting, so surely the age-old debate of renting versus buying is a thing of the past?
At face value, it really is a “no-brainer” after all a monthly rental payment is money down the drain compared to paying for your own home and investing in yours and your families future.
But it’s not quite as simple as that!
The recent State of the Nation’s Housing Report found that nearly 39 million households across the country can’t afford their housing.
Experts advise budgeting around 30% of your monthly income for renting or mortgage costs but nearly 19 million are paying more than 50% to cover their housing needs, mainly due to changes in circumstances and taking on more than they could afford.
Despite the current low-interest rates buying a property is still a huge commitment, especially when you consider the average length of a mortgage is now 30 years.
A lot can change during that time to both yours and the economy’s situation, which can have a huge impact on payments.
At the time of writing mortgage rates are at their lowest level of 2017 (3.89%) but that means they are only likely to rise, with Freddie Mac predicting the rates will rise to 4.3% in Q4.
That might not seem like a lot but it can quickly add up.
Based on the average house price of $244,800 and a down payment of 20% repayments at the current interest rate would be $1188 but by the end of the year they would be $1234 – that’s a rise of $46 a month or $552 a year!
Rents, on the other hand, are easier to predict, less of a commitment and easier and quicker to get agreed.
But it’s essential to remember that if you choose to rent over buying as a long-term option you will be paying it for life, so even after retirement. But with buying a home you pay the mortgage for the agreed term and then when that’s paid up the home is yours and you’re effectively living rent-free.
Buying also means you stay in a house for as long as you want to, not as long as your landlord wants you to. There’s no one to sell from under you, forcing you to leave and you make the rules. So pets are allowed, you can decorate how you like and any renovations you do are adding value to your home – not someone else’s.
While you might be at the mercy of the economy when it comes to the interest rate rises, unless you agree a fixed term mortgage, there are plus points too. You could make a profit if house prices rise giving you the choice to cash in if you want to.
If you’re tempted to make the move from a renter to a buyer there are a couple of things to consider and be clear on before making the leap.
If you are looking to take out a joint mortgage there is the added commitment if the relationship fails, it can be costly and complicated to sell.
You are also responsible for all the bills and any repairs.
And finally, there are larger financial consequences if you fall behind on the payments, which can result in repossession and even bankruptcy.
The last thing to think about is this…..
Whether you are a renter or a homeowner you are paying a mortgage, so why not make sure it’s yours!