Buy Now / Refinance Later
Even though rates are up, many people are seeking to purchase a home. The reason? Rental rates. If you do a comparison of a specific property; rented vs. owned, you will generally find that you are paying almost as much renting the property, and you don’t get the tax advantages and equity increase from owning a property. Here is a fictitious scenario to compare:
One bedroom condo for sale in San Diego. 2BR / 2BA / 1,134sqft.
- Selling Price – $499,000
- 20% down, excellent credit, 7% rate, P&I $2,655, T&I $592 = $3,247/mo. total
- Rental Estimate – $2,500/mo.
So it will cost you about $750/month more to own instead of rent, but you get the additional tax credits and increase in equity over time. And your rental rate will only increase over time.
Once the Fed is done raising rates, and they start coming down in a year or so, you can refinance at a lower rate and be paying an even lower amount. For instance, if rates drop back down to 3%, the monthly P&I would drop from $2,655 to $2,274 saving $381/mo or $4,572/year.
Even if you are paying a little more right now to buy vs. rent, owning will save you money and increase your net worth over time.