The real estate market has been a hot topic of debate over the last few years. With increasing interest rates and a competitive market, many buyers are holding off on buying. But how long should you wait to buy? Does it make sense to continue renting your home rather than paying toward a mortgage, regardless of how high-interest rates are? We have compiled a list of reasons it may make more sense to buy rather than rent.
Rent Prices Keep Increasing
Rent prices continue to increase. Rent prices are largely set based on demand. When interest rates increase, more people hold off on buying. This means more people are renting, which allows property owners to increase rates. It’s not just the higher cost of rent either. Rental properties are also subject to security deposits, first and last month’s rent, and cleaning or tenant change-over costs. When you add up all these costs, you could be well on your way to saving up a down payment to help purchase a home.
Long-Term Investment
You may have heard the saying, “You’re throwing away your money when you rent.” What this refers to is where your money is going. When you rent a property, you hand over your monthly rent to the property manager. They submit a portion or all of it to the mortgage company. In the meantime, the property manager is earning equity in the property at your expense. If you were to buy your own home, you could earn your own equity.
Equity is the difference between the value of your home and how much you owe. As you make your monthly payments, you’ll pay down the balance and earn equity. When you’re ready to sell, you can collect the difference in cash. Even if you don’t decide to sell anytime soon, you may qualify for a home equity cash-out refinance, which can give you money to make renovations or pursue other business ventures.
Assistance Programs
One of the biggest barriers to homeownership is coming up with the required down payment. A down payment is typically anywhere between 3-25% of the purchase price. However, programs and grants are available that can help you come up with this money. A first-time homeowners loan through the Federal Housing Administration (FHA) may also offer more favorable terms, making buying a home more achievable. Veterans and their spouses may also qualify for Veterans loans, which sometimes require as little as a 0% down payment.
You can even use gifts if you mark the money as a gift. Ask family and friends to help you fund a down payment as an engagement or wedding gift rather than household goods. Many family members are also willing to gift money following graduation. Begin collecting this money now, and you’ll have a down payment in no time. Choosing a lender specializing in home loans in your intended state is a great way to learn about the available programs. District Lending helps Arizona residents achieve their dreams of home ownership.
Predictable Payments
One of the biggest inconveniences of renting is that you never know when your landlord will increase your rates. When you have a mortgage, you have more control over your monthly payments. Your lender won’t increase rates without justification, and this is usually due to an increase in insurance or property taxes. Additionally, you have a payoff date, which isn’t the case when renting. Most home mortgages are between 15-30 years. A 30-year mortgage usually means cheaper monthly rates, but you’ll pay more in interest. A 15-year mortgage has higher payments but less interest over the life of the loan.
Ability to Make Renovations
One of the best parts of owning a home is that you get to renovate and remodel it to match your and your family’s preferences. Most property owners don’t allow renters to paint, knock down walls, or make any other permanent changes to the property. Once you own your home, however, you have the control to do as you want, which means endless DIY projects!
Opportunity to Refinance
If interest rates keep you from buying now, know you can always refinance. The problem with waiting is that so many other potential buyers are also waiting. As soon as interest rates drop to a better percentage, the market will become competitive again. More buyers drive up the price of homes, meaning you’ll pay more. You can always refinance into a lower interest rate if you choose to buy now.
If you’re one of the intended buyers who feel like they got pushed out of the market due to high prices and increasing interest rates, you may find that now is a good time to buy. Buying now still allows you to refinance into a better interest rate later. You’ll also build equity in the meantime instead of helping a landlord.
