When you purchase a home, you stop paying your landlord and start paying yourself – everyone’s heard that. Maybe you’ve had this old adage knocking around in your head for a while now, you’ve been saving for a down payment, and you’re considering making the leap into home ownership. In that case, you may be interested to find out it is now officially cheaper to own a home than to rent.
Texas-based media outlet, Culture Map, recently reported this shift, based on the findings of Zillow’s mid-2015 affordability study. According to the study, those making the U.S. median income can expect to pay 30% of their monthly income on rent, up from the 24% renters were paying 15 or 20 years ago. In contrast, home owners will only be required to put about 15% of their monthly income into mortgage payments, down from 21%.
There are many contributing factors, but one big reason for the change is that mortgage rates keep dropping, reaching a new record low each week, it seems. Other reasons include the drop in housing prices during the last recession, and a failure to completely recover to pre-recession numbers. And finally, the median income is not increasing with the same acceleration as monthly rental figures.
This isn’t just a phase, either. Zillow’s report predicts that rents will continue to rise. And while mortgage payments could increase when mortgage rates turn back around, mortgage affordability is still expected to remain better than renting.
Find information on current mortgage rates and information for first-time homebuyers at LoneStarFinancing.com.