Rent vs. Buy: Either Way You’re Paying A Mortgage

Rent vs. Buy: Either Way You're Paying A Mortgage | Keeping Current Matters

There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage – either your mortgage or your landlord’s.

As The Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.  

That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

The graph below shows the widening gap in net worth between a homeowner and a renter:

Increasing Gap in Family Wealth | Keeping Current Matters

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, owning might make more sense than renting with home values and interest rates projected to climb.

 

The “Upside” of “Downsizing”

Masion entrywayThe Upside of Downsizing Your Home

By Anne Miller

You worked so hard to own your home, it’s hard to imagine moving on—much less to a smaller abode. But while downsizing your home may involve major lifestyle changes, there are a lot of advantages to moving into a smaller space.

Downsizing remains one of the most effective ways to lower housing and energy costs.

These are just a few of the advantages:

  • Lower mortgage payments
  • Lower utility bills
  • Less to clean
  • Easier to maintain
  • Less yard maintenance

While the size of the average American home remains fairly large, there are signs that downsizing may increase in the future.

Home Downsizing Trend: No More McMansions

The average American home has grown from under 1,900 square feet some 20 years ago to more than 2,400 square feet, according to 2013 U.S. Census data.

Families who bought five, ten, or even 15 years ago or more might find many rooms unused as their children have grown and moved out. While the baby boomers continue to hold on to many of those larger homes, according to recent reports, experts predict an uptick in downsizing as the oldest boomers enter their mid-70s.

 “We continue to move away from the McMansion chapter of residential design, with more demand for practicality throughout the home,” writes Kermit Baker, chief economist at the American Institute of Architects. “There has been a drop-off in the popularity of upscale property enhancements such as formal landscaping, decorative water features, tennis courts and gazebos.”

Large foyers are becoming a thing of the past. The formal living room is being replaced by a more flexible open plan, such as a large family room/breakfast nook/kitchen combination.

Downsizing Your Budget

For some homeowners, of course, downsizing is not a matter of choice, but of necessity. Many families are still digging out of the recession, which had an impact on home values, employment and retirement nest eggs invested in the stock market. A couple finding itself with a diminished income may simply be unable to keep up with mortgage payments and maintenance costs on a 2,800-square-foot home on a half-acre lot.

Still, the very idea of downsizing takes some getting used to—much less carrying out a downsizing plan. If you feel stuck, a home downsizing consultant can help you formulate a plan of action, appraise and sell belongings, and estimate how much money you stand to save.

Learning to Live With Less

Downsizing your home means a change in lifestyle and attitude. You may have to learn to live without a garage, that extra bathroom, and the basement storage where you tossed years’ worth of home goods, equipment and mementos. A smaller home can mean less room for guests and less opportunity for privacy.

As you consider downsizing, ask yourself these questions:

  • Do you feel ready to live more simply?
  • Are you prepared to divest yourself of resources?
  • How many of the things you’ve accumulated over the years do you truly treasure?

Home downsizing is really about making do with less. But some people would say that less is more. Rather than devoting your time and energy to supporting and maintaining your home, you may find yourself devoting more of your time and energy to enjoying it.

Based on an earlier version by Ben Garson.

The top 5 benefits to using a professional when buying a home

Every year the National Association of REALTORS releases their profile of home buyers and sellers in which they reveal the results of a yearlong survey of buyers and sellers. The latest profile revealed what actual buyers saw as the benefits of using an agent during the home buying process.

Here are the Top 5 reasons cited for using a REALTOR: http://goo.gl/FnHczP