How's the Market TV – Renting vs Buying Podcast
Nancy Braun: Welcome to How’s The Market: Real Estate, Real Answers. I’m Nancy Braun, your host and owner of Showcase Realty. And I'm here with Wes Pruitt, with Stonegate Mortgage and we're talking real estate, renting versus buying, which is better for you. Well, the biggest reason I believe is, it's much more expensive to rent than to buy. In fact, it's 44% more expensive to rent than to buy.
Wes Pruitt: Yeah, that's quite a big percentage you know and right now, the clients that I'm currently working with, they're in fact it's actually cheaper to own the home than it is to just pay rent for someone else to earn equity on the house.
Nancy Braun: Absolutely. Absolutely. And that's why we're doing this show because there's so many people out there that are renting. In fact, renters are becoming the dominant market and we need more buyers out there and the buyers are actually gonna come out way ahead of the game.
Wes Pruitt: Sure there. You know, truly, they're estimating right now that the mortgage rate tipping point for the Charlotte market right now is 13.3% and what that means is that rates would have to reach over 13.3% in order for it to be cheaper to rent than to actually own the home.
Nancy Braun: And that's what we're talking about back in the 80s when the rents, you know, when mortgage interest rates were in double digits.
Wes Pruitt: Exactly. I think that was about the rate when I first my folks got on their first home.
Nancy Braun: And what are the rates now?
Wes Pruitt: Right now, rates are still lowest they've been in about 50 years still. They're somewhere around 4 to 4.5% depending on credit and what kind of downpayment you're gonna put done today. In fact, like I said, they're still lowest they've been in about 50 years and I'm currently working with Chuck right now. Chuck, he's got a paying $1500 in rent at the moment and doing a new loan for him at 4.5% based on his situation. He's actually gonna save $200 a month including his escrows.
Nancy Braun: And live in a home instead of being in an apartment.
Wes Pruitt: Build that equity. Absolutely.
Nancy Braun: Okay, So there's a lot of advantages. So basically, owning a home, you've got the pride of ownership. I know when I became a renter and then switched over to be a homeowner, I mean, my happiness just went up and just an emotional happiness. But I also love to having a home. I love inviting people over, having guests over and gardening, having my dogs out in the backyard, not having a tenant above me or below me. It's disturbing me or me disturbing them. So I had a lot more privacy. And then, we have the financial advantages. Every time you're paying your rent, you really paying off your landlord's debt versus if I'm paying my mortgage, I'm paying towards my principal so I actually owning more of my property.
Wes Pruitt: Absolutely. It's a difference of creating equity and wealth for your landlord or creating equity and wealth for yourself.
Nancy Braun: So it's a no brainer to me. So mortgage payments, they remain the same over a fixed rate loan so rent can go up, it's obviously gonna always go up. What landlord lowers your rate. So you're also at the back and call of a landlord whether they decide to increase your rent this month and all of a sudden, you're even more upside down.
Wes Pruitt: Right, yeah. If a long term investment you know, really owning is going to help you burn, build long term wealth for yourself and not the other person.
Nancy Braun: Absolutely and I tell you when I went from a renter to an owner, I felt pretty, like I should have done this way way way before. You know, the earlier you get into ownership, the quicker you're building your equity and your retirement account.
Wes Pruitt: Absolutely. And right now is a great time for everyone to really give in on the advantage of homeownership today. A lot of people are sitting on the sidelines, I think they're really unsure but now is the time to take advantage of the situation we have currently.
Nancy Braun: And when you file your tax returns, you get wonderful tax right off which there aren't that many right offs anymore. But they still cap the home ownership right offs so you can right off your interest and your property taxes.
Wes Pruitt: Right. And I'll give you an example. On a $150,000 loan today, and 4.5%, you're gonna save about $6750 and that interest reduction approximately. And if you're in the 28% tax bracket, that's $18090. Actual cash dollars back to you at tax time.
Nancy Braun: So you might get a refund check.
Wes Pruitt: You could get a refund if you are really getting a refund, it's that much bigger. If you're not getting a refund, which would ---- be that much less.
Nancy Braun: So it just makes all the sense on the world to again for financial reasons but emotional reasons as well, lifestyle reasons.
Wes Pruitt: Sure.
Nancy Braun: To have homeownership. So the other thing that we haven't covered is appreciation. And historically, you could, whenever someone owns a home over a period of time, typically, if you own it long enough, you're gonna see appreciation. And that means, let's say you start out you start out, you bought the house for $150,000, maybe you own it for 10 years and it appreciates over the time, it then it maybe worth $200 over certain period of time. Now you have even more equity in the property.
Wes Pruitt: Right. I honestly feel that's probably the best long term investment any individual can make.
Nancy Braun: Well, they make every economic analysis will show that if you hold a property long enough, you're gonna see some gains.
Wes Pruitt: Sure. Historically, it's the best thing you can do.
Nancy Braun: So what's some of the downsides of renting?
Wes Pruitt: Well, you know, at this point, if you're renting, your payment, nothing is deductible.
Nancy Braun: Correct.
Wes Pruitt: Again, we're talking about the benefit of the landlord receiving the wealth appreciation, the equity in the house and you're not really seeing you know, again, it just doesn't make any sense for you to make somebody else wealthy when you can start working for yourself.
Nancy Braun: And when you own a home, you can improve that home based on what you want.
Wes Pruitt: Right.
Nancy Braun: You can paint in colors you want, you redo the kitchen, if you're handy, you can add something to the house, but when you're renting, you don't really want to invest in any of your time on money or your sweat equity into someone else's property.
Wes Pruitt: You don't really have that pride of ownership that you would have if it's yours. And the other thing is any improvements you do make, when you do leave, they stay with the property.
Nancy Braun: They do, they do. And then the rent payments are not deductible. There's no deductions. So in fact, when someone tells me that they are typically used to paying $1200 a month in rent, they can actually afford to buy more because they have the deductions.
Wes Pruitt: Exactly.
Nancy Braun: And they'll stolen, they'll the put the net.
Wes Pruitt: Right. The example I gave at 1890, it's a $157 change a month that you would basically be getting back.
Nancy Braun: Right. Or you could apply and buy a nicer house and still have the same amount of money going towards your housing cost.
Wes Pruitt: Right. The net ends in that -----.
Nancy Braun: So if you're ready to stop renting and buy your own home, then give us a call. Showcase Realty will be happy to assist you with your home purchase. And for more valuable information like you heard on today's show, go to the howsthemarkettv.com. Okay, and for more valuable information like you heard on today's show, go to the howsthemarkettv.com. You can watch more videos, listen to previous podcasts, give valuable tips with easy-to-download free reports and buying or selling a home. Just go to howsthemarkettv and click on the free report, how to stop paying rent and own your own home. So if you're ready to take the next step to buy your home, think of Showcase Realty and call us at 704-440-0007. Remember, for everyone home bought or sold with Showcase Realty, we make a donation to the boys and girls club of greater Charlotte. So please call Showcase Realty at 704-440-0007 or visit us at our website, Showcaserealty.net. I'm Nancy Braun, Wes Pruitt. See you next time.
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