Going from Renting to Buying is Not Quite the Same Thing

There are a lot of real estate articles out there telling you that if you can afford a rental payment you can afford a house payment. Heck, I've probably written some myself, but is that really true? If you can afford a $2000 rental payment does not mean you can afford a $2000 mortgage payment? Well, there are differences. For starters, if something goes wrong in a rental, you typically have a landlord you can call to fix, repair, or replace items. When you own the home, those responsibilities fall to you. But there are also other costs involved in homeownership.

The major difference is what the mortgage includes. While rent is simply a once a month fee, mortgage payment includes four different things called PITI.

Principle: The principle is the amount of payment that goes towards the balance of your mortgage loan. This pays down the actual mortgage loan that you took out.

Interest: This is what the loan cost you.  This is determined by your interest rate and most interest rates are amortized, which means that the longer you pay the less interest you have.

Taxes: You'll need to pay property taxes as a homeowner and they are usually blended into your mortgage payment through an escrow company but can be paid by annually or annually out-of-pocket.

Insurance: You will need homeowners hazard insurance, which can also be paid through an escrow company to cover your home in case there is the weather damage, theft, or other potential issues.

It's important to know what goes into your mortgage payment. If you have an FHA mortgage or you obtained a mortgage that was close to 100% of the loan value, you will also have to add on private mortgage insurance or PMI. This can be canceled after a couple of years if the loan to value ratio drops below 80%. But this could add anywhere from $100-$300 per month. 

And again, you will have the responsibility of repair and replacement if necessary. So while the actual monthly housing payment might be similar, there are other factors involved. But remember, you are building equity. Your home is probably gaining just as much is you are paying out every single month and it's kind of like an investment that you can live in at the same time.

For more information please browse my website or contact my office today to schedule a showing of any Palm Beach Gardens or Jupiter home for sale.