In an uncertain economy during changing times, many would-be homeowners are rejecting the idea of investing in their own homes because they are uncomfortable taking on the obligation of a multi-decade mortgage. But what many people don’t realize is that as long as you are paying rent, you are paying a mortgage – just not your own.
As Entrepreneur Magazine, a premier source for small business, explained this month in their article, “12 Practical Steps to Getting Rich”:
While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances.
It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.
Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Management organization at Freddie Mac, explains another benefit of securing a mortgage versus paying rent:
With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.
As a home owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you won’t ever again see the money you are investing in rent, and it’s a guarantee that the landlord is the person with that growing equity.
Many of the excuses consumers make for not investing in a home include the expense of a mortgage, worry over not being able to pay off that mortgage quickly enough, the concern of not getting the money back out of their property at the time of resale, or the responsibility that comes with owning and managing a home.
For those renters concerned that a mortgage is too expensive, it’s often less than the cost of your rent. And the beauty of a mortgage is that your payments go towards paying down the principle of what you owe that can later be recouped during the resale.
In well-performing markets, experts are also seeing equity rise year after year, so it may be that you even will make money at the time of resale. And with options like renting out your property at a higher rate than your mortgage or offering it up through services like Airbnb, you’re safe from life events that could keep you from being able to pay your mortgage.
More importantly, interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.23% last week.
Bottom Line
Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.
Not only can you benefit from rising equity and falling interest rates, with the popularity of renting and home-sharing websites like Airbnb on the rise, you’re still making a sound investment in your future.
And please, don’t forget to download
My Buyers’ Guide:
“Things to Consider When Buying a Home”
As a home buyer, there’s plenty you need to know. You’re about to make the largest financial investment of your life, but with my Home Buyers Guide, you’ll have the information you need about buying a home, right at your fingertips.
Here’s what you will find inside:
- The Cost of Renting vs Buying
- 2 Myths That Might be Holding You from Buying
- Why Pre-Approval Should be Your First Step
- What You Need to Know About Mortgage Process
- What to Expect When Home Inspecting
- And More!
The best part is, our Guide is free and available to download right now. All we need is your name and email, and we’ll send it directly to you.