We get it, deciding whether or not to renew your lease is a big decision. If you’ve been watching the market for a while, maybe you’re thinking that renewing is the best option for you right now. While there are situations where that may be the case, it’s important to understand that homeownership may be well within your reach, and there are many benefits waiting for you if you can make that switch. We’re here to touch on some of the important factors to keep in mind as you decide what the next best move is for you!
You May Be Paying More Towards Rent Than You Would a Mortgage
For many, the idea of purchasing a home seems out of reach. However, it may be more attainable than you think. According to an article by Keeping Current Matters (KCM), renters actually pay a higher percentage of their income towards rent than homeowners pay towards their mortgage. On average, homeowners spend 16% of their income on the cost of the housing whereas renters pay 26%. The graph below from KCM depicts the discrepancy between what many pay for renting vs homeownership.
You’re Building Your Landlord’s Wealth - Not Your Own
Housing is an inevitable cost, whether it’s through renting or homeownership. A percentage of your income will have to go to sustain this. When you rent, your monthly payment goes directly into the hands of your landlord. That money has no chance of turning into anything greater down the road. However, with homeownership, you can think of your money going into a savings account where it can build interest. Your home is going to build equity and when it comes time to cash out, you’ll have something to show for all of your monthly payments.
According to KCM, MA & NH’s average equity gain over the past year was $49k! Across the US, there was a 6% increase in total homeowner equity over the past year. Wouldn’t you want to put your monthly payments towards this kind of investment vs handing it to someone else to capatlize on?
Your Mortgage Payment Won’t Go Up - Your Rent Might
Rent prices continue to be on the rise, shown by the infographic below from KCM. By renting, you are subjecting yourself to these increases. While an apartment may fit in your budget this year, there’s no guarantee that you’ll be able to afford that same apartment when it comes time to renew your lease. Your payments are entirely subject to the landlord’s discretion. On the other hand, when you lock in a mortgage, your monthly payment will remain relatively unchanged. The only variable that could impact that payment would be if your property taxes or insurance rise. Keep in mind that these variables only make up a small portion of your monthly mortgage costs.
Bottom Line
It may be tempting to fall back to renting, especially in a competitive buying market. However, homeownership may actually be well within reach. Additionally, homes are continuing to appreciate, and if you’re thinking it’ll be easier to make the switch later on, you might want to reconsider. If you are able to make the jump, we highly recommend making the move today! Homeownership is a huge milestone for anyone, and it’s also the first step to building your net worth. If you’re on the fence, we’d be happy to talk through any questions you may have and the home buying process to help you determine if this is the next best step for you!