Build Equity with a Home Mortgage, or Pay Rent?
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by: marciafreeman
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The interest rates for a home mortgage have dipped to levels not seen since the 1970s. There has, consequently, been a jump in the number of consumers applying for a new mortgage. The percentage of applications that are approved, however, is not as high as it was prior to the credit crisis. Banks are requiring that borrowers meet more rigid requirements. In many cases, borrowers need a credit score of at least 720 to qualify for the lowest rate home mortgages. And many banks call for at least 20 percent down (or 20 percent equity, in the case of refinancing.) Those who do not meet the criteria can often still obtain a home mortgage, but at a higher interest rate and with a requirement to purchase home mortgage insurance. In spite of the low rates, some home buyers are choosing to sit out the real estate roller coaster a bit longer. They are unsure if prices have hit their lowest point. Other consumers are just not comfortable taking on the burden of a home mortgage when the economy is in such a rocky state. The discussion about whether to rent or buy continues among those hoping to purchase a home. The decision is an individual one that should be dictated by your own financial and personal goals.
Before you consider whether you should rent or take on a home mortgage, you should think about how long you intend to be in the house. The bulk of payments made on a home mortgage the first handful of years is heavily weighted toward paying interest, rather than equity. There are added costs of buying a home, such as attorney and bank fees for closing, appraisals, inspections and title fees. Being a tenant might be more economically beneficial, if you expect to only be in the property for a few years. Interest paid on your home mortgage is tax deductible, but rent is not. Rental payments and home values are significantly out of balance with one another in a lot of areas of the country right now. In those markets, your monthly payment for rent would be considerably less than what you would pay in mortgage payments for living in the same property. The money you do not have to put toward a home mortgage can then be invested elsewhere, which could earn you more money as a renter. Being a homeowner instead of a tenant has some psychological components, as well. As a homeowner, you can remodel, paint and modify your home, which you cannot typically do as a tenant. As a tenant, you may also have to move out at the end of the term on your lease. There are more financial burdens that come with being a homeowner, but you will accumulate equity when you make your home mortgage payments and you do not have to answer to a landlord.
Some analysts predict that interest rates on a home mortgage will stay low throughout 2009. Some borrowers are betting that low rates will not stick around, and are choosing to purchase or refinance their homes now. If you decide that buying makes more sense for your financial plan and future than renting, then now is a great time to shop around for a home mortgage. Sites Consulted Loans -
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Find more information related to mortgage refinancing, click to refinancerates.incomestores.net/?Federal-Reserve&view=4112.
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