Understanding How To Get The Most Affordable Housing
As rent prices are increasing year after year even while mortgage interest rates are hovering at historic lows, it makes sense that at a certain point buying a home becomes more affordable than renting in the long term. The trouble is discerning exactly when that certain point will fall.
One of the biggest pieces of advice we give home buyers is to determine how long you will be in your home. With all of the upfront costs that come with home buying, including but not limited to title fees, loan origination fees, appraisals, and inspections, it often takes buyers some time to recoup their money. Consequently, if you plan to be in a home for a short time, it usually does not make sense to buy.
However, because mortgage rates are so low right now while rents are soaring, buying a home is generally more affordable. In fact, American renters are expected to spend twice as much of their annual income on housing than homeowners (30 percent versus 15 percent).
How, then, do you determine if you fall in the majority, or if your short-term needs outweigh the overarching logic leaning towards buying? Calculating all of the costs of buying (e.g. monthly mortgage payments, insurance, taxes, maintenance, utilities, closing costs) versus the costs of renting over time can help you determine where you would break even when buying. If you will be in your home past that point, it makes sense for you to buy.
A real estate expert can help you determine if buying or renting will best serve your short- and long-term financial needs. To get guidance so you can make the right choice for your family, contact The Barr Team in Irvine. We are here to lend our years of experience in the Southern California housing and rental market to your aid.