Are you thinking about buying a house? With inflation rising, you can use your home as a hedge against inflation. Let's explore what it looks like to own a home vs. paying rent.
According to the Consumer Price Index last week, inflation rose 7% over the previous 12 months (ending in Dec. 2021). That 12-month increase is the largest since June 1982! The largest contributors were used cars and trucks and… drumroll… shelter. Now is a good time if you're thinking about buying or selling a house.
The interest your money is earning in the bank is minute compared to what you could be earning in equity as a homeowner. Although home prices have grown, so has the cost of rent, so why pad the pockets of your landlord when you could invest in a house and make money.
Mortgage rates are still historically low. The interest you'll pay on a mortgage loan is generally less than the appreciation from the home you own. In addition, a home loan provides you with a consistent monthly payment (fixed-rate mortgage) — no more battling climbing rent costs. With a fixed-rate mortgage, your equity is likely to grow faster than inflation. What more could you ask for?
Let's say you put a 10% down payment on a $400,000 home, with a 3.5% mortgage rate river 30 years. The home appreciates 4% each year. This would provide you with approximately $220,000 in equity over a 7-year period, resulting from appreciation and amortization.
Enjoy low-interest rates and fixed mortgage payments when you buy a home today, and forget about annual rent price hikes. Talk to your real estate agent about buying a home today.
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