Buy Vs. Rent Which Is Cheaper Part III
http://www.RigleyRealtyGroup.com Rocklin Homes for Sale, Rocklin Realtor Mike & Jennifer Rigley discuss Rocklin Homes For Sale - Rocklin Home Buyers Blog -- Buy vs. Rent Which is Cheaper Part III
Rocklin Realtor and Rocklin Area Specialists Mike & Jennifer Rigley here bringing you the latest Rocklin Real Estate Information. Thank you for joining us. Today we are continuing our 3 part series on Buying vs Renting as reported by Jed Kolko, Chief Economist at Trulia.
Why Mortgage Rates, Tax Brackets and Timing Matters in the Rent vs. Buy Debate
So what if you can't get the best mortgage rate, don't itemize your tax deductions or stay in your home for less than seven years? Each of those raises the cost of homeownership, so buying wouldn't be quite as good of a deal relative to renting. Here's why each matters:
• The best mortgage rates are available for people with the best credit scores -- and a not-so-hot credit score could make your mortgage a full percentage point higher, which translates to at least a 10% difference in your monthly mortgage payment.
• Itemizing your tax deductions lets you subtract your mortgage interest and property tax payments from your pre-tax income, which lowers your tax burden especially if you're in a higher tax bracket. How much does not itemizing raise the cost of homeownership? It depends on your tax bracket and the amount of mortgage interest and property taxes you would deduct.
• Selling a home in less than seven years after buying it means that you're spreading your buying and selling closing costs over fewer years -- making the average monthly cost of homeownership higher.
If Buying is So Cheap ...
... why isn't everyone doing it?
Home sales are still less than halfway back to normal, and the homeownership rate continues to fall. The big obstacle holding back renters who want to buy is the down payment -- even more than getting a mortgage. And keep in mind, in the metros where the cost of buying is less than half of what it would cost to rent over the long term, it still takes years to save enough for a down payment. It may be 56% cheaper to buy than to rent in Denver, for instance, but it takes more than 8 years to save enough for a down payment there. And high unemployment during the recession made it even harder than usual for people to save for a down payment. On top of that, people who lost their homes or took on lots of debt might not qualify for a mortgage. Bottom Line: Buying may beat renting in every major metro by a wide margin, saving consumers thousands of dollars a year, but buying still remains out of reach for many would-be homeowners.
I hope you enjoyed this series. Need help finding that perfect place to call home? Call us today at 916-378-4671 for a free no obligation consultation or log on to http://www.RigleyRealtyGroup.com to start your on-line home search now. Call us today -- you'll be glad you did.