Real numbers can help prospective buyers understand just how worthwhile an investment in a new home can be.
Whether you’re newlyweds starting out, a middle-age couple downsizing, or seniors contemplating retirement communities, you too will likely need to evaluate the economics of renting vs. buying at some point.
Let’s look at the benefits that can occur when buying a home versus continuing to rent.
This infographic from United Guaranty compares the cost of renting vs. buying over a 5-year period. Note how quickly savings can be realized when you buy vs. rent. Indeed, the cost of renting exceeds the cost of owning a home over a 5-year period.
It’s not as simple as comparing the monthly cost of a mortgage to the monthly cost of paying rent. For those who purchase a home, there may be tax savings that are often overlooked. For example, mortgage insurance (MI) premiums can be tax deductible for purchasers who qualify.
The other consideration is equity. Most people who purchased a home five years ago have seen a rise in the value of their home. On average, a median priced single family home increased from $156,000 in 2011 to $185,000 in 2016.
Assuming a $156,000 home with a 4.25 percent interest rate, the borrower now has $14,390.78 of equity in his home.
What about renters over the same five-year period? No equity, no investment.
Rents have been rising nationwide, so maybe it’s time for you to consider leveraging mortgage insurance so you can make the switch sooner. It can take renters as long as 12.5 years to save up the 20 percent down payment typically required on a conventional loan without mortgage insurance.
Qualified borrowers have the chance to close the deal on a home faster with MI, without a towering down payment.
To read the full article at ugcorp.com, click here.