According to recent studies, Americans have drastically shifted their approach to homeownership over the past two decades. People are renting in increasing numbers, and fewer are taking the jump into homeownership. From 2005 to 2015, the number of new renters soared by nearly 9 million, far outpacing the number of new homeowners.
People rent for a lot of reasons, many of them good: flexibility, convenience, love for the high-rise life. But we also know that many renters dismiss homeownership out-of-hand when it might be the best option for them. Here are the four most common myths about buying a house versus renting an apartment.
MYTH #1: Ownership Is More Expensive.
If you compare the overall price tag to your monthly rent, homeownership doesn’t seem all that affordable. But unless you’re buying a home outright and paying in cash, it’s not a fair comparison. In many cases, a monthly mortgage payment will be comparable to (or less than) monthly rent payments, especially since rents are increasing nationwide. In 2015, they jumped 4.6%, the highest increase in nearly 10 years. According to a recent study, it’s cheaper to buy a house than rent it in 42 states.
Plus, unlike a rent check, a mortgage payment establishes equity in your home. It’s also tax-deductible.
MYTH #2: Forget Saving Money.
You might think that after a downpayment, and mortgage payments, and furnishing, and repairs, and maintenance, and property taxes… saving money is a lost cause. But think of it this way: Every mortgage payment that pays down principal and interest is a kind of “forced savings account.” You have to pay it, so you do. But unlike a rent payment, that money isn’t vanishing into the ether (or, as it’s more commonly known, your landlord’s pocket). Assuming you don’t default on your loan and go into foreclosure, you’ll see that money again, in a different form. By establishing equity in your house, you’ll be seeing long-term value in the form of an investment. You’ll also be eligible for new lines of credit. It might take 30 years to pay it off, but it won’t be 30 years of checks down the drain.
MYTH #3: No One Will Give You a Loan.
After the housing crash, banks are a little more cautious about lending to new homeowners than they were in 2007. Still, it’s not impossible to get a loan if you have decent credit and some funds in reserve. Even if you don’t have the standard 20% down payment, you might be able to qualify for a new initiative from Fannie Mae and Freddie Mac. It backs mortgages with down payments as low as 3% for borrowers with credit scores of at least 620. That’s great news for young homeowners just entering the workforce.
MYTH #4: Home Ownership is for Old People.
According to the National Association of Realtors, over 35% of new homebuyers in 2015 were Millennials, making them the largest group of recent buyers for two years running. And the median age for Millennial homebuyers was 30. So it’s not just Gen X or Boomers buying houses. (In fact, Boomers are moving into apartments in droves.)
Homeownership is a huge commitment, of course, and it should take more than reading a blog post to convince you to apply for a loan. Before you make any decisions, take a clear-eyed and ruthless look at your finances, your plans for the future, and your willingness to be responsible for basic home repairs. If you think homeownership is for you, get in touch with The Columbus Team to set up a consultation. Happy house hunting!
This article was provided by Sam Radbil, a contributing member of the marketing and communications team at ABODO Columbus apartments.