With mortgage rates rising, more people may be asking themselves the age old question: rent or buy?
These decisions are particularly pertinent amid bubble-like housing prices, making monthly mortgage payments more difficult to manage, and also sky-high rents that have proven to be one of the economy’s stickier forms of inflation.
More homebuyers are pulling out of deals given the environment. Here’s how to weigh the biggest housing decision you may ever make in your life.
Take a big-picture approach
Trying to time the rate market isn’t wise. If the buying elements are right for you, it could still make sense to buy, even as rates are rising.
But before plunking down money on a down payment, consider what the next few years could look like. Are you interested in planting roots, or is there a strong chance you’ll relocate in three to six years?
Rent premium versus ownership premium
Prospective buyers need to remember that the premium they are paying in rent is temporary. So in the least, do not force a decision to buy if your financial situation provides good reason to be more deliberate. Moving, whether to a new rental or newly purchased home, has its costs.
Prospective buyers need to make sure they have enough set aside not only for moving expenses but also for home maintenance — initial and ongoing.
Determine whether you have enough money for a down payment or might you be better off delaying a purchase until you do. And in addition to hiring movers and home repairs, homebuyers need more money set aside for buying new items and furniture. Additionally, if there is a gap or overlap between moving, buyers may have to pay double the mortgage or stay in a hotel until their new home is move-in ready.
Your income and personal financial security
Would-be buyers should also consider how their financial picture could change in the near-term. What happens, for example, if a spouse wants to stay home to raise the children? Or what if one of you gets laid off? Can you afford to live on one income? Also consider the source of your income? Is it secure in a recession? And what’s your future spending likely to be?If you have a great buying opportunity, but are concerned about your finances, it could make sense to put down a smaller deposit, even though it will mean private mortgage insurance.
Call us at (480) 205 2234 to get more information on current mortgage rates so you can make a better decision. |
