Rent is paying mortgage, but not yours.

When potential first-time homebuyers consider making the transition to homeownership, they ask themselves whether it makes more financial sense to keep renting or to buy. The pandemic has undoubtedly impacted that calculation. Annual house price appreciation skyrocketed during the pandemic, reaching an average of 17.5 percent annual growth in the second quarter of 2021, as demand for homes continued to outpace supply.

So, what goes into the monthly cost of renting or owning?

The cost to rent is relatively straightforward – it is the amount of rent paid by the tenant every month. The cost of owning, on the other hand, is made up of multiple pieces – it includes taxes, repairs, homeowner’s insurance and the monthly mortgage principal and interest payment.

One of the best ways to build your family’s financial future is through homeownership.

Recent data from the Federal Reserve indicates the net worth of a homeowner is actually over 40 times greater than that of a renter. With the continued inflation, home prices will continue to rise. Maybe, it’s time to start thinking about buying a home.

Build Financial Security

Every three years the Survey of Consumer Finances shows the breakdown of how owning a home helps build financial security. The gap between owning and renting just keeps getting wider over time, making homeownership more and more desirable for those who are ready.

Most people would want to have their own homes. There is a feeling of security and pride in owning the house you are living in. The ongoing argument is that the house you keep paying rent for can never be yours while if you take out a mortgage and pay a little more than your rent amount, the house will eventually belong to you. Most people say owning a house is an investment.

The Impact of Home Equity

In general, Americans pick real estate as the best long-term investment for the seventh year in a row. According to a survey, 35% of Americans chose real estate over stocks, savings accounts, gold, and bonds. Today, there are great opportunities available for those planning to buy a home. The housing market has made a full recovery, and low-interest rates are giving homebuyers a big boost in purchasing power. Buying a home can increase your net worth and create a safety net for your family’s future.

A Renter’s Mindset

Many renters think that they just can't afford a new home. They are pleasantly surprised to find that a house payment is very comparable to their monthly rent. Rent and mortgage can actually be similar. The only difference is that when you rent, you are just paying for a temporary stay. But, if you take out a mortgage to buy a home, you are building your equity with every payment.

House Payment: The Details

Initially, most of a new house payment is made up of principal, mortgage interest and real estate taxes (up to 90% of the monthly payment in some cases). As time goes by, more and more of your payment goes towards your principal and less towards interest.

Nearly all of us pay a monthly housing payment. Some pay a landlord, others pay a mortgage company. In both cases that payment is building equity in the place where you live. The question is, whose equity are you building? Equity for you and your family, or for your landlord? Doesn’t it make sense to explore the option of owning your own new home?