Do I even WANT to own a home?
Why not just rent?
Home prices are high. Like really high. In July 2022, the median home price in the Portland Metro Area was $635,000! But you know what is also high? RENT! In Oregon, landlords are allowed to increase your rent by 7% every year, plus inflation. For 2022, that means a 9.9% increase. *UPDATED: The new increase cap for 2023 is 14.6% (Learn more here or here) So if your current rent is $2000 a month, your landlord is legally allowed to increase your rent up to $2,292 a month.
If you’re on a month-to-month agreement, they have to give you 90 days notice, and if you’re on a lease they can increase the rent you renew. And, this increase cap only applies if you are already renting. If you move out, the landlord can (generally) increase the rent on the next tenant however much they want. And get this: while the average asking rent in the US increased 17% in the past year, in Oregon, that rate jumped up 40%!!! (Reach out to me if you want to know more about the technical reasons for this.)
Granted, there are costs of owning a home that renters avoid. Owners don’t have a landlord to fix things when they break. Owners are also responsible for general maintenance and any yard work (unless you’re an owner who lives in an HOA that handles yardwork for you). So, it is a good practice to include in your budget a cushion for repairs and maintenance, because they *will* come up, even in a new construction home. It’s also a great idea to have a home warranty that can offset the costs of large repairs. These policies range from about $300-800 a year, depending on how much your home is worth. I believe in home warranties so much that I provide one for my Buyer clients as a gift at closing 🙂
When you own your home, you are not subject to rate hikes.
And, depending on how much you put down when you purchase, your mortgage payment may even go DOWN once your Mortgage Insurance Premium drops off. You can also refinance to a lower payment if the market interest rate drops significantly from when you purchased. Do you think your landlord will lower your rent if mortgage rates drop? Yeah, right!
Let’s say you’re lucky enough to live in a rental that does not increase in price much from lease to lease. You are still missing out on one of the best things about owning: EQUITY. You gain equity when you pay down your mortgage, when you make substantial upgrades, and from the market value of your home increasing over time. You could pull this money out for a future project, investment, vacation or whatever. Or, you can put your equity towards your next home. Let’s say you buy your home for $400,000. In five years, that home would likely be worth at least $460,000 (That’s using a VERY conservative rate of only 3% equity. From 2020-2022 the average American home gained 40% in equity! That means a $400,000 home in 2019 could sell for $560,000 today.
Utilizing equity is one of the best ways to increase your personal wealth.
Perks of owning a home
- EQUITY!!!!
- Ability to pull out cash if needed
- Price stability (no rent hikes)
- You can remodel and decorate however you want
- No pet restrictions
- Sense of pride of ownership
- Paying your mortgage improves your credit (paying your rent does not)
Who should NOT buy a home?
While there are many benefits to owning a home, those benefits might not matter to some people.
You should NOT buy a home if:
- You plan to move within 5 years
- On average, the equity you gain in only 5 years may not be enough to offset the fees associated with the purchase and sale (although if you bought in 2020 and sold in 2022 you would have made $$$)
- You are never home
- If you travel a lot or are never home, you might not have time to enjoy your property or to do the required maintenance.
- You can’t afford it
- This probably seems obvious, but just because you qualify for a loan doesn’t mean you will actually be able to afford the monthly payment, taxes and maintenance costs. This doesn’t have to stop you though!
- Solutions to the “money problem”:
- Buy WITH someone! You don’t have to be married to buy a home with someone else
- Buy a cheaper home…for now. WAIT a few years to gain some equity, then buy better later
- Buy a home and then take on a RENTER to help you make the monthly payments
The Bottom Line:
You have to pay to live somewhere. You can either pay your own mortgage or your landlord’s. Why not use your home’s equity to build wealth?
Finding out if you can afford a home needs to be one of the first steps you take.
So, say it with me! All together now:
“Talk with a Lender!”
Reach out to me today to make it happen!
