When I did a rent (and invest) vs. buy analysis back in January 2021 with a 2.6% interest rate, the results were pretty neck-and-neck. As rates climbed this year, I figured it would be fun (I’m using the word “fun” loosely) to revisit the exact same scenario with the higher rate.
Depressingly, when we recorded this episode just last week, the rate was 5.95%. In the course of a single week, it’s now surpassed 7% as of publish (9/27/2022). How have the rates changed the math now and how does one realistically budget for a median home in the US today with 6+% 30-year fixed rates? Let’s find out.
I’m also joined by Andy Taylor, VP & GM of Credit Karma Home (https://www.creditkarma.com/) to discuss breakeven costs, refinancing, and borrowing against home equity.
Episode transcriptions can be found at https://www.podpage.com/money-with-katie-show/.
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Mentioned in the Episode
- Summer 2022 interest rates: https://www.forbes.com/advisor/mortgages/mortgage-rates-08-31-22/
- Early 2021 rent vs. buy analysis: https://moneywithkatie.com/blog/when-the-math-supports-buying-your-primary-residence-instead-of-renting
- “Average net worth of homeowners,” from CNBC: https://www.cnbc.com/select/average-net-worth-homeowners-renters
- Quit Like a Millionaire by Kristy Shen: https://www.penguinrandomhouse.com/books/592323/quit-like-a-millionaire-by-kristy-shen-and-bryce-leung-foreword-by-jl-collins/
- Data on home ownership averages: https://www.ngpf.org/blog/economics/qod-how-many-years-has-the-typical-american-homeowner-been-in-their-current-home/
- Average median home value, from The Motley Fool: https://www.fool.com/the-ascent/research/average-house-price-state
- Private mortgage insurance: https://www.investopedia.com/mortgage/insurance/
- Average homeowners insurance: https://www.investopedia.com/insurance/homeowners-insurance-guide/
- Average property tax rate: https://smartasset.com/taxes/texas-property-tax-calculator#UMznyF9L22
- Average mortgage rate for 30-year term: https://www.bankrate.com/mortgages/todays-rates/mortgage-rates-for-monday-july-25-2022/
- Amortization calculator: https://www.bankrate.com/mortgages/amortization-calculator/
- Paying interest first in mortgage payments: https://www.investopedia.com/ask/answer/07/mortgagepayments.asp
- Average broker’s commission: https://www.ownerly.com/real-estate/average-commission-for-real-estate-agent/
- Average closing costs: https://themortgagereports.com/35800/guide-to-mortgage-closing-costs-what-average-mortgage-costs-are-and-how-to-keep-yours-low
- Average 3% rental increases: https://www.apartmenttherapy.com/average-rent-increase-percentage-268659
- IRS Standard Deduction: https://brighttax.com/blog/irs-standard-deduction-expats
- Rule of 150: https://www.businessinsider.com/renting-versus-buying-a-house-advice-math-rule-2019-9
- 28/36 Rule: https://www.investopedia.com/terms/t/twenty-eight-thirty-six-rule.asp
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