Can you afford to throw money away?
Mortgage interest rates have been bumping along the at lower limits of the scale for a long time now, but many people still believe it’s not financially viable to buy their own home. While rentals in most states continue to rise. This means that even if renters are determined to become home owners, the drain on their monthly income from their rent checks is making it impossible to save up enough money for a down payment.
A 2016 report from Business Insider shows that in all but eight states (plus the District of Columbia) buying is the cheapest option in the long run. But the decision to become a homeowner rests on a number of factors that are not always purely financial, there’s the emotional investment to consider as well.
A ‘Forever Home’
For most people, the decision to buy their first home is made as much with the heart as with the head. Owning your own home can be liberating and if you’re relatively young when you do it, you can feel that you’ve finally entered adulthood. Home ownership puts you in total control of your own space, free to adapt it to suit your lifestyle; it gives you a sense of privacy, security, and a base from which to start planning a family. Don’t like the carpets? Change them! Want a cat or dog? Get one! Want to paint your whole house a different color? Do it!
Compare the costs
You’ll find many online tools such as smartasset.com that will give you a great idea of the costs of renting versus buying. Just enter a few details about the area you’re considering and the tool will automatically populate the fields with average house prices, average rents and show you at a glance at what point renting stops being viable. You can play around with the values to your heart’s content to get a really good feel for the overall costs.
For a worked example, a Forbes report from January 2017 which listed the up-and-coming real estate markets for investors. I took their top pick Dallas and used the smartasset.com tool to find the tipping point between renting and buying an average home. Using average prices for a two-bedroom apartment I found that buying is better than renting after just 4 years. Extrapolating these rates over 30 years (all things being equal) that’s also a saving of almost $30,000.
That’s a new car, new luxurious kitchen, or money for a investment property.
The Long Term
Beyond the day to day considerations, there’s always the long term. Instead of lining a landlord’s pockets, home owners are in the position of owing a considerable asset that will increase over the years and possibly provide a retirement income. While home ownership is not a decision to be made overnight, it’s certainly one to ponder. And dream.