So when are you ready for homeownership after renting for awhile
Renting may sound like an affordable option, but homeownership can actually be the better money saver in some cases.
In a world of rising rent costs and record low mortgage rates, one might think homeownership is the way to go.
In certain markets, it’s actually possible that the costs of homeownership are well below your monthly rent payment, which for many renters has surpassed half their income. Might make you think twice about living in that tiny apartment space, right?
If so, it might be time to speak to a real estate expert. Before you go out and make an appointment yourself, here are a few professional tips that can help you figure out what to do when renting costs more than homeownership.
Do the Math
To find out if becoming a homeowner can actually save you money today, it’s going to take a bit of number crunching.
Simply do the math. Look at the current rental rates and use a mortgage calculator to figure out whether purchasing would be less expensive than renting.
For instance, say you were purchasing a home in Nairobi, and you needed to take out a Kes 15,000,000 mortgage after the down payment. With today’s interest rates, you might end up paying approximately Kes 25,000 a month. When compared to a two- or three-bedroom apartment at 40,000 per month, that’s a Kes 15,000 difference
Of course, you would need to meet the qualifications and restrictions for the type of loan you want, some of which are even targeted to first-time homebuyers. That’s when it’s time to speak to a professional to get a better idea.
Get Professional Advice
There is a multitude of down payment assistance programs and other loan programs designed to help renters become homeowners. Speaking with a Realtor or financial advisor would be a great start in helping you find the program that could work for you.
All buyers before we even look at a home, whether for rent or for purchase, to find a reputable lender and find out if they can be preapproved to purchase.
This will rely heavily on your credit history.
It’s important to speak with a lender to determine your creditworthiness, which directly relates to the proposed housing payment if you buy. Your credit score and the size of your down payment will directly impact your purchase housing payment.
Your trusted expert can help bring all this to light, guide you through the entire process and highlight industry and mortgage trends in your market.
Consult a Realtor or mortgage advisor to see what you can afford and how much you would have to put down. With interest rates being as low as they are currently, taking out a mortgage on a home you purchase can lead to a monthly payment that is often the same or lower than what you spend each month on rent.
Read the Signs
If you’re not quite ready to head to the professionals just yet, there are a few other signs you can discover for yourself that might hint that you’re ready — or not ready — for homeownership.
Do you live in a market near a major metropolitan city? Large metro areas such as Nairobi, Nakuru and Mombasa are more likely to have skyrocketed rents.
Most urban core areas are more cost-effective to own than to rent.
Do you have a steady job in a city you don’t plan on moving away from in the next five years? A steady job in a city you love is another great sign you’re ready for homeownership.
Five years is the typical amount of time it takes to recover the acquisition costs of a home and a steady job proves that you have a dependable income supply.
Do you know what equity is and are you ready to build it?
If so, you’re probably ready to start reaping this benefit and the others that homeownership offers, such as:
- Equity: Instead of throwing away money to your landlord, you’re putting money into a property you own. After your home and all mortgage payments are paid off, you might find more value in your home than you knew was possible, especially in a booming market.
- Tax breaks: Homeownership can make you eligible for certain tax breaks on the interest within monthly mortgage payments. Therefore, you can get a lot of money back when you file your taxes every year.
- Insurance discounts: The difference in multi-line discounts for homeowners and renters is significant, Hooper says. In some cases, the auto rates discounts for homeowners can be twice those of renters.
- It’s all yours: Finally, you are free to make that home as unique as you are — as long as you stick to city and HOA ordinances. From pets, paint choices, design and architecture, you can create a home that completely suits your wants and needs.
A lot of young people who join the workforce and maintain a good income are not aware of the opportunities they have as first-time homebuyers to own their own place. While not everyone’s first home is their dream home, becoming a homeowner prepares you that much more for eventually obtaining that perfect home you have always dreamed of.
