If you have been sitting on the sidelines in the housing market, you have undoubtedly watched interest rates remain close to historic lows and housing prices shoot up. At the same time, as a renter, you have experienced the increase in rental rates first-hand. In many areas of the country, new housing communities and real estate agents proclaim that a mortgage is cheaper than renting. An initial review of the numbers reveals that this is true. However, a wider view of the situation may reveal something else.
A mortgage payment is comprised of loan principal and interest charges. Given how low current interest rates are, the mortgage payment for these two components often is lower than rent when you compare similar residences. However, a mortgage payment also includes escrows for taxes and insurance, and these are not often taken into account when someone states that owning is more affordable than buying. In addition, homeowners are responsible for property repairs, and this is not usually the case with renters.
Keep in mind that most advertised mortgage rates take into account a 20 percent down payment as well. The average price of a home is now $400,000, so the typical down payment would be $80,000. The cost of getting into a new rental home generally is a security deposit that roughly equates to one month’s rent.
Altogether, you may find that the cost of renting versus owning is similar in many areas of the country, but you should analyze the situation closely in your area. You should also keep in mind that homeownership gives you the ability to establish equity and to enjoy home-related tax deductions.
To determine if buying a home makes financial sense, you need to have all of the facts in front of you. Contact our team at MortgageDepot today to learn about the home loan terms that may be offered to you.
Connect with one of our loan consultants to learn more.
Have questions or need help?
Call us now at 800-220-LOAN
Request a call back or email us your questions!