While it’s still a little cold in Chicago, it’s bound to get warmer sometime right? But the weather isn’t the only change that takes place in early Spring. As my fellow Chicagoans know (and maybe dread!), the majority of the city’s leases end in April and moving week madness begins. This year, instead of fighting with the crowds, try springing into homeownership and making those hectic move out dates a thing of the past.
To Rent or To Buy
The rent vs. buy debate has been carried on for generations and I’ve written about it extensively. While buying a home is not a decision that’s made lightly, the benefits of buying your own home often far outweigh the benefits of renting.
According to a recent survey conducted on behalf of Fannie Mae*, 42% of millennials believe the biggest benefit to homeownership is being able to make their living space their own without the restrictions of a rental. If you’ve ever rented a home before, you’re aware of the downside of living by a set of rules from your landlord. Whether it’s a no-pets-allowed policy or being forced to keep the 70s shag carpet, these rules detract from truly making a house your home. When you own a home, you have the freedom to create a space that suits you, and you can do whatever you want whenever you want! And hands down the best part is you can’t get kicked out when your landlord decides they want to double the rent (this happened to one of my friends recently even though he’d been a good tenant for the past 5 years!).
The same survey shows that 25% of millennials want to buy a home because they want to put money towards something they own and will someday sell. When you’re making monthly rent payments, you’re essentially investing in your landlord’s future instead of your own. You’re making your landlord rich instead of yourself! Mortgage payments are an investment in your own future. Owning a home is an investment because when you’re ready to eventually sell your house you’ll ideally make back the money you spent and then some! Not only are you spending money on something that could give you potential returns but you’re getting many additional perks, like the mortgage interest tax deduction, that you can’t get renting.
If homeownership is so preferable to renting, then why don’t more millennials buy a home? Well according to the survey results, 54% of millennials who rent feel that they’re not financially stable enough to afford a home. Luckily, this is often a misconception. Mortgages have become increasingly accessible for people in all financial situations and are turning out to be a smart investment decision for many. One of the main reasons for not feeling financially stable is outstanding debt. In most circumstances the debt millennials are facing comes from student loans. Lenders have now created programs that offer mortgages specifically for potential homebuyers with student debt.
The other main road block for many is a mortgage down payment. Survey results also show that 83% of millennials believe the down payment on a mortgage is more than 3%. This is another misconception that should not stand in your way of buying a home. Lenders are now offering programs that require a down payment of as little as 3%. These programs also offer flexibility in where this down payment money comes from. Whether you’re paying rent or paying a mortgage, a monthly bill is inevitable. The upside is that owning your own home offers flexibility and freedom that renting does not.
Spring in Chicago
So the Cubs are back at Wrigley, music shows are almost back in Millennium Park, and you can almost taste that first hotdog of street festival season. The Chicago housing market is also still an incredible investment, with many neighborhoods selling at record prices and forecasted to increase in value over the next several years.
If you are currently renting, getting ready to renew your lease, or are ready to start hunting for a new one, it’s time for you to see if it makes better financial sense to buy instead of rent. Take a second to step back and learn about your lower down payment options here – you won’t regret it.
* Survey data in this blog post has been sourced from a November 2017 survey among 1,008 U.S. adults ages 18-36. This unpublished survey was conducted in the United States by ORC International on behalf of Fannie Mae.