Awhile back I posted a question on my Facebook page asking what the pros and cons were about buying a home and renting a home. Some of the pros of renting were that repairs would be made by the landlord and renters don't have to pay that dreaded property tax bill!
Some of the cons of renting: All landlords don't jump to make needed repairs and some tenants, afraid that their rent will be raised, won't ask! Also, you never know when you may have to move should the landlord need to sell his property.
Well, it turns out that financially speaking, the cost gap has narrowed. Affordable home prices and low interest rates have created an ideal time for many diehard renters to purchase homes, and now a new week-long look at homeownership confirms it.
A national study, conducted for The Associated Press, shows that the difference between monthly rents and mortgage payments is at its lowest level in nearly 20 years!
The analysis of 45 metro areas found the difference between the monthly mortgage payment on a median-priced home and the median rent has declined to $256. In some areas, the difference is as low as $100, according to the study. The last time the price gap was that close was in 1993, when it decreased to $264!
The study, conducted by Marcus & Milichap Real Estate Investment Services, used median prices for the last three months of 2009 and calculated mortgage payments by assuming a 10-percent down payment and a 30-year fixed loan at 5.07 percent. It also assumed borrowers paid for private mortgage insurance and didn’t include repair costs and tax benefits.
And don't forget, owning a home does have significant tax benefits, including deductions for those dreaded property taxes and loan interest. Homeowners also can enjoy building equity and creating a means of forced savings as they pay down the principal on the home.
If you are a renter and think you might want to wade in to a home purchase, you can prepare by ensuring your credit reports are up to date and save for a down payment of at least 20 percent, or at least enough to pay for your closing costs.
Although home buyers should not focus solely on future home price appreciation, according to data collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) over the last 40 years, homeowners who purchase a median-priced house, live in it for at least five years, and sell it at the then-current median price, have averaged an annual rate of return of more than 11 percent.
As a long-term homeowner, in my opinion, owning our home has rewards that far outweigh any cons. Planting a tree and knowing that more than likely we will be here to see it get bigger each year! Christmas dinners and our traditional Easter egg hunts. Yes, it is good, and Lord willing, will continue to be so.
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