Why You Should Buy vs. Rent
Buying a new home is one of the largest purchases and investments a person can make in their life. Choosing wisely can set you up for financial success in the future, but sometimes making the leap to make that purchase can be difficult and expensive.
According to NBC News, people who own a home rather than habitually rent have a net worth 40% higher than other individuals on average.
This may sound enticing, but how can you achieve home ownership if you aren’t financially ready right now? There are many things to consider when you want to make the switch from renting to buying.
A Down Payment
Arguably the largest barrier for many people is the down payment needed when buying a home. Many home buyers opt for a 20% down payment on their new home to avoid additional costs and fees associated with insurance. However, did you know you can put as little as 3.5% down with a FHA loan?
A first time homebuyer loan helps those who are buying for the first time get into a home a little easier than a conventional loan. Although it does come with some restrictions, it is more affordable upfront.
Fixed-Rate Mortgage Payments
When you are first weighing your options between monthly rent payments and monthly mortgage payments – renting may seem like the route to go. Although rent might be a cheaper option now, over time the cost of living and renting goes up and up. It may be by $100 or $200 a month year by year, but after a while you will be paying much more than you originally were.
A fixed-rate mortgage will keep your payments the same each month for the entirety of your 30-year loan. That means that while the cost of living goes up, your housing staying the same. You can also consider how over time, you will likely make more money than you are right now with cost of living raises and job changes, meaning the percentage you will be paying for housing compared to your overall income will drop.
Home Equity
The equity you put into your home can have a big influence on your overall net worth in the future. Simply put, the equity you have in your home is the amount you have paid towards your mortgage vs. what you still owe. The more equity you have in your home, the better.
This equity can help you in many ways. When you have more equity in your home, you can then take that money and borrow against it in the future if needed. For example, if you want to renovate or refinance your home, the more equity you have in your home means you can borrow more money than those who don’t. You can also use this same tactic if you want to borrow against that equity to pay off other debts.
Having equity in a home is the number one way you can build your wealth.
Taking the first step towards home ownership can be a daunting task. Our team of real estate experts can help you understand what you need, what process you need to follow, and help outline the benefits of owning a home in a way that makes sense in your life.
Contact us today to learn more about owning a home and building your wealth for the future!
