Is It Better To Rent Than Buy a Home Right Now?

Many people are reading the headlines saying that renting is the more affordable option currently in the market, and sure, that may be the case if you’re looking at monthly payments only, but what equity does renting bring you? None. You need to factor equity in to your decision, and we are here to break it down for you.

Monthly Payments Only 

When comparing median rental payments and median mortgage payments, rental payments are more affordable on a monthly basis, especially when you’re not in need of a lot of space, like a studio or a 1 bedroom apartment. However, if you’re look for something a bit bigger, like a 2 bedroom, the gap between the two begins to shrink to something much more affordable. It comes down to a $151 difference a month, which can be a doable difference for people in the debate between buying and renting. Now, let’s factor equity in.

How Equity Changes the Game

Obviously, you are not building equity within a rental property, you don’t own the home and your rent simply covers your housing costs and some landlord expenses, and this money is gone forever as soon as you pay rent. 

Owning a home covers your housing cost, but also is an investment, and a big one. With this investment comes growth in equity as you chip away at what you owe. Your equity is boosted as home values increase over the years, which majority do, and they are predicted to appreciate as seen in the graph below. 

So let’s break it down. You buy a home for $400,000, you stay there for 5 years paying your mortgage payment, and then you sell. According to experts, you are looking at an $83,000 gain in household wealth simply because your home grew in value. So while you do save some money with smaller monthly payments, you will not be saving $83,000 worth, and you will miss out on the large benefit of gaining equity.

Bottom Line

Everyone’s situation is different, and if the numbers don’t add up for you to buy, you simply don’t buy. However, if you are ready and able to buy, fire your landlord today and Sooner or later, you’ll call Jim Slater! Buying a home gives you the chance to gain equity, something renting will never do. Real estate is one of the best investment opportunities for people to make, but it is important to invest wisely. If you are ready to buy, call Jim Slater today at 612-590-1802 to help you make the best investment for your future home.

Source

Coldwell Banker Realty | realtor.com