Are you currently renting? Is your lease coming up for renewal? Before you extend your lease for another year or two, why not consider exploring the possibility of buying instead of continuing to pay someone else’s mortgage? First of all, we are not going to say everyone should buy a house. Not everyone wants to. But there are many advantages to homeownership. On top of the normal benefits to homeownership, this is quite the time to buy! A few reasons to become a homeowner now rather than later include the following.
8 Reasons to Buy Now Instead of Renting
- Home prices are expected to rise
- Interest rates are expected to rise
- Flexible and affordable financing available
- Potential income tax deductions for interest, PMI, taxes, & fees
- Do what you want with your home (subject to HOA, legal rules)
- Long term fixed P&I payments = predictability & easier to budget
- Building long term equity versus none as a renter
- Protect against inflation
Home Prices Expected to Rise
In many cases, renters are surprised to learn that the monthly mortgage payment to buy a house may be less than they pay for rent. However, since home prices are increasing, this translates to potentially more equity or personal wealth for you, the buyer. As a recent article mentions on Realtor.com, “After all, your home is your biggest investment and most significant asset.”, so why not buy now to take advantage of increased equity? While there is no guarantee that real estate will appreciate, historically it has and has been the largest asset for many who choose to buy. Furthermore, your landlord is keenly aware of this.
First time buyers are affected most by a rise in purchase price and values. The reason is this raises the entry price level of homes. In any real estate market, a first time buyer median price at $200,000 compared to $150,000 really knocks a lot of buyers out. For the most part, prices are not going down. Therefore, home buyers have more advantages in purchasing now versus later.
Interesting to note, if housing is expected to rise, it is not only houses that are for sale …. you can expect the same from rentals as well. So it only makes sense to lock in a monthly payment that you can be comfortable with and have control over in the coming years.
Interest Rates are Expected to Rise
Currently rates are near all-time lows which helps home affordability which helps many buy a house. According to a recent article from Housing Wire, “Home prices continue to increase, yet affordability actually improved since July.”. At this time, the consensus is that the Federal Reserve expects to raise their rate in December as well as maybe 3 times in 2018. The Federal Reserve’s interest rate is not the same as a mortgage interest rate but has a direct impact on what you may expect to pay when you borrow money. Check out this article explaining factors that affect long term mortgage rates.
Flexible and Affordable Financing Available to Buy a House
It amazes us to hear so often that first time buyers cannot buy a house because they don’t have a 20% down payment. That is quite the misconception! Options available for first time buyers today include so many low to no down payment loan programs. Plus, just because there is a low or no down payment financing program option, it doesn’t mean the interest rates are much higher. Conversely, most interest rates for government loans such as VA, FHA, and USDA are lower than conventional rates with 20% down. Even when a down payment is required by a program, it may even be a gift! So the barrier to cross from a renter to a homeowner is about as low as it has been in years!
Rent Increases Compared to Fixed Mortgage Payments
According to a recent article in Mortgage News Daily, “Most of the 20 largest core-based statistical areas had rent increases, but those with limited new construction and strong local economies tend to have low rental vacancy rates and stronger rent growth”.
When you rent, you are for the most part at the mercy of the landlord, inflation, and the rental market in general. At lease renewal, increases can be from the single to even double digit percentage amounts. Sound familiar? Actually it is pretty uncommon for rent payment to stay the same for back to back years. On the other hand, buying a home with a fixed interest rate gives you an element of control and a sense of predictability in what you will pay each month for as long as you own the home. Plus, there are additional homeowner benefit and tax benefits as well!
Is a Rent Early Termination Fee Keeping You From Buying?
What if you find the right house to buy, but you are a ways off from the lease renewal? There are sometimes options to buy out of a lease through sellers paying the termination fee. Often, the penalty for early termination of the lease is one month’s rent. So, keep in mind that with a closing date strategy, it is possible to have the mortgage first payment 1.5 to almost 2 months after closing. This is another added bonus for renters who many have a concern about finances and transitioning easily as a renter to a homebuyer.
Think smart, buy smart, live smart!
Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.