News stories about rising home prices have gained ample attention recently. While rapidly rising home prices yield considerable equity growth for homeowners, they mean that buying a home may be increasingly challenging for first-time buyers. Each market is unique, and market conditions can change rapidly at times. Nonetheless, the 2021 Rental Affordability Report indicated that owning is still more affordable than renting in the majority of counties surveyed. What makes homeownership a financially superior option for many people?
Low Interest Rates
Mortgage interest rates have generally been ticking upward over recent months, but they continue to remain incredibly low in relation to historic standards. Interest rates can essentially be viewed as the cost to borrow money. Because this cost is so low at the moment, buyers often are surprised by how much money they can afford to buy in relation to their personal income. Are you wondering how much you can afford to borrow? Consider using a home loan affordability calculator online for an estimate. You can also get prequalified for a home loan for firm information.
A Fixed Loan Payment
When you own a home, some expenses will increase gradually over time. For example, the cost of maintenance and your home insurance rate may increase over the years. However, if you take out a fixed-rate mortgage today, the combination of principal and interest charges for that loan payment will remain steady for as long as the loan is active. With this in mind, a significant portion of a homeowner’s housing expense will remain the same potential for decades. Rent payments, on the other hand, will escalate.
Another financial benefit of homeownership may not be fully realized until you refinance your mortgage or until you sell the home. This benefit is equity appreciation. Equity increases in a home because of two primary forces. One of these is a rising home value. While home values can decrease, the long-term trend in value has been upward. The second force is the decline in your mortgage balance. The amount owed on your home mortgage will decrease with each payment made. Because these two forces work together, equity can grow at a rapid pace in some cases. When you buy a home, the portion of your mortgage payment allocated to principal debt reduction acts as a type of long-term savings. This is not the case when you rent a home.
You can see that buying a home today could be more affordable than renting, and buying may have increasing financial benefits for as long as you own the home. With this in mind, it makes sense to explore your options today. You can get started by getting prequalified for a mortgage and looking at homes that are affordable for your budget. When you are ready to get serious about your home search, contact Elizabeth Bos for professional assistance.