“Is it better to rent or buy?” Real estate professionals face this question rather frequently and each side presents its own financial benefits. However, evidence supports that homeownership is more affordable than long-term renting.
Many renters avoid buying because of the daunting down payment. For prospective buyers looking to make at least a five-year investment in the home, homeownership will be the less expensive option. Typically, with a 3% annual appreciation rate and 12% in closing costs (6% to the realtor and 6% to the taxes, title, and additional costs), it would take the buyer four years to break even on their purchase. All throughout that time, if the homeowner is making reasonable effort to pay off the mortgage, they are building equity and credit.
Apartment rents are growing exponentially. CNBC reports that rents are rising faster than most other consumer purchases. In the last four years, it has gotten more difficult for many renters to save for a down payment, “even though homeownership turns out to be a better deal in many markets around the country."
Making the decision to keep renting or to buy a home is a largely financial one, and financially it favors the buyers. With flexible loan financing options, skyrocketing rents, and historically low rates, buying is the better long-term option.