A premier source for small business, Entrepreneur Magazine, put out an article called “12 Practical Steps to Getting Rich.” In this article, they state that renting on a temporary basis isn’t the end all, but if you are serious about your finances you need to own your own home. You won’t get rich fast but by renting you are making someone else rich.
Another plus is that with a 30-year mortgage you have the stability of knowing what your monthly payment will be for the next 30 years and can more easily fit it into your budget. Rents have a tendency to rise to rise upon each renewal period, so if you are renting for one year, expect the rent to rise at the end of the year. Most landlords raise their rental rates based on the interest rates or listing prices of homes in their areas.
Being a homeowner, the mortgage company forces you to build equity in your home that you can use later in your lifetime. As a renter, the landlord builds the equity and you get nothing.
Interest rates are still historically low even though the Fed has raised short term rates by .50 already this year. Short term rate increased does not affect 30-year mortgage rates directly. Freddie Mac reported these average mortgage rates as of March 23rd 2017.
- 30-yr FRM - 4.35% with 0.5 Fees/Points
- 15-yr FRM- 3.44% with 0.5 Fees/Points
- 5/1-yar ARM - 3.23% with 0.4 Fees/Points
So our takeaway for today is think hard about buying a home as opposed to renting. Home prices will only increase and mortgage rates along with it. A small percentage point can mean an extra $200.00 or more out of your budget each month whether you rent or own.
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