Can You Really Afford to Keep Renting?
With the rising cost of renting, many people are considering buying a home. However, some are worried about affordability. If you are paying rent, you can afford to buy a home.
Consider this example:
Buying A Home:
Mary’s $900 mortgage payment includes $700 of interest. Her total annual house payments are $10,800. At the end of the year, $8,400 of that is tax deductible ($700 x 12months). She is in the 28% tax bracket, so her savings are $2,352. Her actual housing cost for the year is $8,448.
Renting An Apartment:
Joe believes he can’t afford to buy. He pays $800 in rent each month which makes Joe’s housing costs for the year $9,600. He thinks he is saving money by renting, but he is actually spending $1,150 more than Mary, and he isn’t building any equity.
Interest rates have decreased in the last 10-14 days and are now once again right around 4.50%. Most experts do not expect mortgage interest rates to stay this low, with home loan experts predicting a rise to 5.00% A raise in mortgage rates of .50% is equal to a 10% increase in home prices and affordability.
So the question you should ask yourself is: Can You Really Afford to Keep Renting?
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