Is Buying A Home Really Cheaper Than Renting?
Is buying a home really less expensive than renting?
Realtors have often heartily proclaimed that buying a home is cheaper than renting. Some have questioned whether this is truly accurate or not. So what’s the real deal?
At the beginning of 2015 the data showed that buying a home had become half as expensive as renting in America. While this represents the national average; the truth is that the real amount renters and first time home buyers will pay for a place to live will depend on local rental and home prices, and what they qualify for as individuals. This can change over time too. As demand for rentals changes, mortgage loan interest rates change, and home prices fluctuate the difference, and savings of owning a home versus renting can change too, at least to some extent.
So what are some of the hidden costs that make some question how cheap buying a home is compared to renting? What secret benefits of homeownership are there that can be absolutely priceless? When is the optimal time for first time home buyers to purchase their first home, and for ex-homeowners to return to the market? What one factor has made buying a home absolutely essential for millions of Americans today, even if they can’t afford to rent?
The Real Cost of Buying a Home
One of the main points of contention in this debate is the additional costs of homeownership that come with buying a home beyond your basic mortgage payment. Most first time home buyers will find that they can easily find a property to buy with a lower principal and interest mortgage payment than they have been paying in rent. However, there can then be property taxes, homeowners insurance, maintenance, utilities, and maybe homeowners association or condo dues. These may be minimal or massive depending on what you are buying and where. Just make sure you tally it all up before signing a contract.
The Benefits of Homeownership
Even if rent and total monthly costs of buying a home were equal there is one massive financial advantage of homeownership which can’t be ignored. That is building equity in your own property versus building wealth for your landlord. Which would you rather do; buy a home for you and your own family, or for your landlord?
Building on this, this also ultimately makes the difference between being priced out of housing in retirement, or owning your own home without payments.
Besides the direct financial perks of homeownership are stacks of data showing benefits for the future of kids, peace of mind and enjoyment of decorating your home the way you really want, and more. These perks can also turn into financial benefits such as better work performance, and improved health.
What has really change this equation since the crises of the early 2000s is that it has become not only so expensive to rent, but so difficult to get approved to rent. In many cases the application process and costs to get into a rental are more expensive and more challenging. It can be far easier to get qualified for a purchase mortgage, and with special programs for first time home buyers and low down payment options it can be cheaper to buy.
Even more important is the widening disparity individuals and households will see between housing costs between those that are renting and those that own. If you have a long term fixed rate loan your mortgage payments won’t go up. Whereas renters can virtually be guaranteed their rent will keep going up every year.