If you’re currently renting a home, condo or apartment, it might surprise you to know that if you can afford rent, you can afford to own a home. Buying a home is a big decision, and based on your personal circumstances, you are the only person who can decide what is best for you. You may think renting is the best option for you. There’s a certain amount of flexibility that comes with renting, especially if potential for new job opportunities requires relocation, or perhaps your family is growing. However, if you crunch the numbers as you consider buying vs. renting, it may make more sense to buy a home. While there are mortgage payments, property taxes, and homeowners insurance to consider when buying a home, you might be surprised to learn that owning is becoming more economical than renting in many areas.
To Buy or not to Buy
Realtor.com and NY Times each have Rent VS. Buy Calculators that you can use to help you make your decision. Simply enter your zip code, a home value that you think you can afford, and your current monthly rental fees. In most areas, you’ll likely see that you will come out ahead buying a home versus renting a home or condo. The calculators use current interest rates and homeowners insurance rates, and tax values for your area. One thing these calculators will not know is the amount of association fees you might be paying if you’re currently renting a condo or living in a neighborhood with a homeowners association. Those fees can be as little as $100 or as high as $500 a month so it’s important to adjust your monthly rent amount when weighing your decision.
Mortgage Costs are Rising
If you’re leaning towards buying a home, it may make sense to act now. According to Bloomberg U.S. sales of previously owned homes is the highest since 2009. Interest rates are projected to rise in September 2015. When more people are buying, inventories become low and prices increase; this is simple supply and demand. An increase in price is going to also increase your closing costs. To bring this a little closer to home, let’s look at Florida:
- The number of closed sales of single-family homes in May 2015 was up 7.7% over May 2014.
- The median sales price for single-family existing homes was up 11.1% from the previous year.
If you were considering buying a house last May for $250,000, this year it will cost you $277,750. That is just the price of the house; your down payment increases, closing costs increase, and interest paid will be higher.
Don’t Forget your Homeowners Insurance
Do you really need Florida homeowners insurance? If you need a mortgage to pay for your home, the answer is “Yes,” but if you do not require a mortgage, you still need homeowners insurance to cover you in the event of disasters such as a fire, theft, lightning and wind. A standard homeowners insurance policy should provide the following coverage:
- Personal Liability Coverage
- Loss of Use Coverage
- Personal Property and Valuables
- Other Structures such as a Detached Garage or Shed
Florida homeowners insurance will not cover flood damage. You should also check with your agent for information on how to insure items not covered under your standard policy such as high-value jewelry, as well as purchasing flood insurance .
Purchasing Homeowners Insurance
A recent appraisal is helpful when purchasing insurance. It will provide most of the information that your insurance agent will need. Take a home inventory to ensure there’s a complete record of your property. Items can be replaced more quickly when there’s a home inventory on file.
The decision to buy a home is one of the biggest financial decisions you will probably make in your life It’s often the smarter choice over renting as you build equity in something that may be the center of your family life for generations to come.