Katie Benner
This means comparing monthly rent, renter's insurance and other related costs with the cost of a mortgage, taxes and, for buildings like co-ops, monthly maintenance fees. And don't forget the hidden costs of buying a home -- there's no super to fix pipes or landlord to upgrade a security system.
Moreover, homeowners who hang in for the life of a mortgage will likely build equity, but the National Multi Housing Council says that nearly one-third of all owners move within five years. In the first five years of mortgage payments, more than 80% of your monthly mortgage payment is interest. If you buy a $200,000 house with a 5% down payment at a 6% interest rate, after five years of $1,139 payments a month, you'll have paid $55,152 in interest and only $13,196 in principal. Moreover, you will likely have paid between $10,000 and $20,000 in maintenance and repair costs to earn that equity, according to NMHC calculations. In this scenario, it could make more sense to pay $1,200 a month in rent and have the flexibility to pick up and go, as well as the peace of mind that maintenance is factored in. Moreover, years of record-breaking home prices have made it difficult for buyers to jump into the market. The gap between home prices and annual rents is widening. NAR research shows that the median home price was 12 times higher than the annual average rent between 1980 and 2000. Now, even as rents jump, home prices are about 21 times higher. In this scenario, renting could be a more reasonable option for a family that cannot afford to buy in a town with high properties and better schools. But at the end of the day, there are many compelling non-financial reasons to buy a home and financial gain may not be the best reason to jump into real estate's increasingly shallow pool. |
RSS
