05/14/2024
Considering buying vs. renting your next home?
Scared of high interest rates?
Most people don't buy homes when interest rates are high, so you aren't alone. It's certainly the path more traveled.
But let's do some math on an example purchase of $400k, purchased with a 7% interest rate:
You'd be paying roughly $500 more per month than if you had a 5% interest rate, but does that make it a "bad" deal?
History tells us that real estate appreciates over the long run at 6%. So, after one year, that home is worth $424k.
Because you bought when rates were high, you paid an extra $6000 in interest over the course of the year, than if rates were normal. ($500 x 12)
So you paid $6k for $24k of equity. And you probably bought the house at a lower price, with less competition, because most people don't buy when rates are high. This doesn't seem so bad..
Now compare that to paying your landlord rent every month. No appreciation, no return on investment, no equity. Just helping someone else grow their wealth, when you could start growing your own wealth.
And we didn't even consider other benefits, such as loan paydown, tax benefits, rental opportunities, forced appreciation, etc.
If you'd like to learn more, feel free to reach out.
Ray Northcutt
NMLS #1982088
