What is the better deal renting or buying?

The age old debate of buying vs renting is as alive as it ever was. 

Does it make more sense to rent or buy, this is a question many have asked. As with anything there are many prevailing opinions on the subject. As a real estate agent I see both sides of it and as a consumer I have been on both sides of it. There is not going to be one right answer that fits every person but I will cover a few common things that may help you decide. The key is to think of things in the long term or big picture.

To start with you want to consider your individual situation.
What are your plans long term, do you plan on staying in the city or area you are living/moving to? If the plan is to stay long term than I believe it makes sense to put down some roots and buy a house. I have many clients that move in from out of town and want to rent for a year before buying. This is a logical step in the process, you get to try before you buy in a sense. Many people also rent because they can't qualify for a mortgage due to credit score or job situation. 

Fixed mortgage rates do not go up, rent prices do.
While there is nothing wrong with renting long term, the reality is that you have very little stability or control of the situation. With a mortgage your payment is fixed every month (assuming you got a fixed rate mortgage). If you are a long term renter your payment will almost certainly go up with on an annual or semiannual basis. This could be a small increase or if you live in a booming city like San Antonio, Texas than I have seen $50-100 increases annually. Rent works off the age old supply and demand model, the shorter the supply the more money landlords can demand. Unlike renting with a mortgage you are unaffected by the supply demand model unless you are buying or selling. 

Renting has no return on investment.
Again long term renting does not build any equity while long term home ownership does. The standard mortgage is either 15 or 30 years depending. This means that at the end of that term you own the home free and clear. If you rent for 15 or 30 years you have nothing to show for it and you don't pay your rent you don't have a place to live. 

Summery

While you don't have things like repairs and maintenance costs with a rental you also don't have the ability to make the house your own. All else aside, historically speaking property has always risen in value which makes it a wise investment. It may not always rise continually but it has always bounced back which means that the only way you lose is by selling it when the market is down. So look at it like an investment that you get to live in and build equity with every payment. 

Mortgage interst rates and why you should buy or sell now.

If you own a home or are thinking of buying you may know that interest rates have remained very low. This is important for anyone that is considering buying or selling a home. You may not think that interest rates matter if you are selling a home but this is not the case. I will give you a couple reasons why you need to pay attention regardless of buying or selling. 

History Repeats itself-

Historically interest rates do not stay low forever (wouldn’t it be nice if they did though). Interest rates have been below 4% for most of 2015 and look to be holding steady through the end of the year. In 2013 and 2014 interest rates spent a majority of the year over 4%. Go back to 2011 and interest rates spent a majority of the year just below 5%. The interest rates are not likely to change dramatically unless we have another housing bubble. While they may not change dramatically the difference between 3.75% and 4.75% will make a dramatic difference on your payment. 

If you're paying 4.75% interest on a $200,000 loan for 30 years you will pay roughly $133,000 in interest over the life of the loan. If you take that same $200,000 loan and drop the interest rate to 3.75% you will pay $176,000 in interest over the life of the loan. So that 1% that doesn't seem like such a big deal will save you roughly $43,000. This is not including the principal amount that you will be paying, factor that in and your $200,000 house cost you either $333,000 or $376,000. Now I don't know about you but I don't care to pay almost as much in interest as I do for the house itself. 

Time is of the essence-

So if you are considering buying or selling now is the time to do it. I don't know what interest rates will do in the coming months or next year but I do know they are as low as they are likely to get. This means that the only place for them to go is up. This affects sellers as well as buyers. For most people selling their home they will turn around and purchase another home. That combined with the fact that you are likely to get top dollar for your home in most parts of the country make it a great time to sell. This may mean more competition when you go to purchase but it also means you get to take advantage of the lowest possible interest rates. The more interest rates go up the less enticing it is for new buyers to enter the market which means your home values may drop. 

One last thought-

To sum it up, nobody knows what the future hold but history has a way of repeating itself. So whether you are looking to upsize, downsize or just get into a different area you have to ask yourself "will their be a better time than now"? So it is up to you, roll the dice and see where the interest rates land when you're ready to move or take the sure thing and move now. 

Dont be house poor, three things to consider before you buy

You may or may not have heard of the term house poor, not to be confused with the poor house. It has a meaning just as it sounds, having a house that is making you poor. Along with your mortgage payment you should consider how, taxes, utilities and Home Owner Associations as well when looking for a home. Don't roll the dice on your future, have a plan.

Firstly you want to consider taxes, because unlike your mortgage payment interest rate taxes don't remain fixed. 

• For example, if you live in a big city like San Antonio, Texas that is rapidly growing then you have likely noticed home prices climbing. While on the surface this may seem like a good thing, along with the climbing home prices are climbing property values. 
• Why does this matter you might be thinking, it is an important factor to keep in mind because as your property value goes up so does your property taxes. In San Antonio, Texas taxes increase by as much as $200 a month in a single tax year for a average priced house. This means that your formerly affordable payment is no longer so affordable. 

The next thing to consider is the price of utilities and any extras that may be involved. For example does the home have a pool, hot tub or water softener? 

• If so what are your cost going to be to maintain said equipment. If it is a pool, you will have to pay to have it cleaned, there will be equipment repairs and the extra electricity usage for the pumps and equipment. 
• The average cost of owning a pool is $256 a month, this adds $256 to your monthly expenses. Water softeners will use electricity but more importantly many systems run on salt which has to be regularly replenished. There is also the consideration of whether the system is rented or owned. If it is rented then what is the cost associated with transferring ownership over. 

The final thing to consider also has the potential to cost you the most. Carefully consider the HOA (home owners association) before you sign on the dotted line. 

• While this may not seem like a significant deal but if you have a mandatory HOA then there can be significant expense associated in the form of dues. But beyond that the HOA has the authority to enforce any and all the bylaws. This can cover anything from the height of your grass, to exterior paint color and even the breed of you dog. 
• Depending on the laws of your state many HOA's have the ability/authority to foreclose on your home or sue you for things like unpaid dues or fines. It can get extreme and sounds a bit crazy but I have seen it happen, people lose everything over a dispute with the HOA that they legal may not be able to win. 
• This being said your realtor should ensure that you get all the deed restrictions and information related to the HOA. Make sure that your realtor does a mandatory HOA addendum to protect you as the buyer.