Renting a property has its own set of benefits, perhaps the greatest is not being responsible for that cost of most home maintenance and repairs. If the fridge stops working for no known reason, it is the job of the landlord to replace it.
But, homeownership also comes with some pretty great benefits as well. There is the stability of always having a place to live and the rent not being raised, as long as the mortgage is paid on time. Then of course there is the ability to benefit from the home equity or appreciation of the property value. You also have the freedom to style your home in any way you want.
Right now with mortgage rates at record lows, many renters are asking themselves if they should take the leap into homeownership and benefit from the better affordability of owning a home right now.
Here are some questions to help renters determine if purchasing a home or continuing to rent would be best for them in the coming new year.
Do I Have a Down Payment Saved or the Ability to Save for One?
The average down payment that lenders like to see from loan applicants is 20%. Some loans will allow you to pay less and many loans of course would be willing to let you put more down on the home. If you do not pay at least the traditional 20% however, the lender will require you to carry private mortgage insurance. This is built into the monthly loan payment. It is not a deal-breaker in many cases, but it does mean a higher monthly payment.
Paying 20% down will also help you to build equity in the home more quickly which is highly beneficial. It also gives a bigger buffer and less chance of becoming underwater on the loan. (where you owe more on your mortgage than the property is currently worth)
Are Home Prices Increasing Dramatically in My Area?
While mortgage rates are very low, and this does make the increase in home price more affordable, the increase is still something to think about. Do some research to look at what home prices are where you want to live for homes you were hoping to live in. You may be surprised to discover that the type of home you want may be just out of reach right now.
Have I Looked Into the “Hidden” Costs of Home Ownership
The price of owning a home is much more than the initial cost it requires to own the home. It is more than just transferring the cost of rent into the monthly mortgage payment. There are things like property taxes, homeowner’s insurance, emergency and needed repairs, and any updating you would like to do. If you are currently living with a tight budget beyond paying for necessities and do not foresee an increase in income, it might be better to hold off on a home purchase.
In this market, with such low interest rates, it is worth it to do your research. Go through your expenses with a fine tooth comb and figure out what you could afford for a comfortable home payment. You may find that it is cheaper to pay for a mortgage right now than to continue paying rent