Recently I have had two clients that think renting a year is a good idea even though we have found the house they want.Â I put this into the category of buyers remorse or the old "cold feet" syndrome.Â
When I get this call from a client I am very understanding of the situation and do not put any added pressure to them regarding this type of emotion.Â I put the numbers to work to see if renting a year truly is a good option for them.Â
In this scenario the homes monthly payment is $2000.Â One year of renting at the same price is $24,000, which is a large amount of money that could be building equity and providing tax benefits.Â The rates right now are at 4.5% which is an extremely low rate.Â Most lenders and economists are in agreement that the rates will be increasing in the very near future let alone the next 12 months.Â
Even if the rates only went to 5% at a price of $250,000, the difference in payment is $76 a month.Â In order to have today's payment at 4.5% you would have to put down an additional $14000 at 5%.Â If you add that with the $24000 in rent you paid for the year that could have gone to a home then you have basically paid $38,000 to rent for 1 year.Â
Now this scenario is a very realistic one but there are variables.Â It is up to the buyer as to whether or not it is worth it to rent the year but if this scenario does play out it is not a financially viable option.Â
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