by James Schneider, Fairway Mortgage Company
Are you on the fence about home buying? Do you plan to postpone home buying in favor of renting? Don’t let your decisions cost you.
As your financial partner and mortgage lender, what’s my take?
Short Answer: Most renters do not understand how much they cost themselves. They penalize their savings by forgoing wealth creation via home ownership in favor of renting. How do you expect to save for the future if you don’t invest for it?
The example below highlights a potential home buyer who makes $75,000 per year and pays roughly $1500 per month in rent.
Taking into account the annual tax benefit, equity created from making monthly mortgage payments and assuming 2% annual appreciation in home values we can quantify how much renting could cost this home buyer at a certain sales price.
Additionally, in the section boxed out in red below, I would ask this renter who’s interested in buying a property for $350,000 if he/she knew by renting they are costing their wealth $18,965 per year (or $1580/month). Is it better to potentially create $1,580 per month in equity or pay $1,500 in monthly rent?
It’s one thing if you can’t qualify for a mortgage; it’s another if you have not explored how home purchasing can help you create wealth. Rates won’t stay low forever, when they do rise, you’re adversely impacting your future wealth.
Many home buyers delay their purchase because they want to save more for a down payment. The housing and mortgage rate markets don’t wait for people to catch up. There are numerous loan programs that require very little to nothing down.
Don’t let your decisions cost you.