When to buy a home in Maine: Can I afford it?
You have heard that home prices and interest rates are still at historic lows, but what does that really mean to you? In my last post, we looked at the long term financial benefits of buying a home vs. renting.
Now we need to take a look at the short term comparison and help answer the question: “Can I afford it?” Buying a home can be exciting, but trust me…it will be much more enjoyable and exciting if you take some time to evaluate your particular situation and answer that question before you begin looking at homes.
Let’s take a moment to compare your monthly rental expenses with the monthly costs of owning a home in Maine. Even if the cost of owning a home is a little higher than what you currently pay for rent, there are still added benefits of home ownership that can make it worth the investment. However, it is best to enter home ownership with all of the facts at your disposal.
The amounts you include in this evaluation will vary depending on what utilities your rent currently includes. Many rentals in Maine do include the cost of heat and hot water in the rent amount, but not all. Generally tenants pay for their own electric bills, but if you currently do not, you will need to add that additional monthly bill to the cost of home ownership. Let’s look at the example below. This family rents a 3 bedroom apartment and is looking at a home in Auburn that would need a $115,000 loan to purchase.
Monthly Cost of RentingTotal Amount of Monthly Rent: $1000 Monthly heating/hot water: $200 Additional Costs (parking): $0 Additional Costs (laundry): $25 Total Monthly Cost: $1325
Monthly Cost of Home OwnershipExpected Monthly Mortgage Payment: $653 Estimated monthly heat/hot water: $200 Estimated home improvements: $200 Monthly Property Taxes: $170 Monthly Home Owners Insurance: $60 Total Monthly Cost: $1283
In the example above, even figuring in spending $200 each month for home improvements, the cost of home ownership is still less than continuing to rent. If you choose a home with a more efficient heating system or one in a town with lower property taxes, this monthly cost will go down even lower.
If you are currently renting and would like to find out if now is the right time to buy a home, please give me a call. I’d be happy to sit down with you and help compare the costs of both for your particular situation.
When to buy a home in Maine - Renting vs. Buying.
You’ve been watching the news, checking out the real estate websites, and thinking that now might be the best time for you to buy a home. After all, how long do you want to continue to send money every month to your landlord, adding to his income and investment portfolio? When do you get to own a place of your own and pay into your own investment? Is rent just money down the drain?
There are both long term and short term factors to consider when deciding if now is a good time for you to buy a home. With both home prices and interest rates at historic lows, I’d like to take a moment to look at how this impacts you in the long term.
With lower home prices here in Maine, you will not only get more home for your money, but you can also borrow less money in the first place – giving you a lower monthly payment. Since the vast majority of your monthly payment goes towards interest charged by the bank for lending you the money, lower interest rates have a huge impact on keeping your monthly payment low as well.
When you combine these two situations, low interest rates & low prices, you end up with a great opportunity to enter into home ownership that may not have been available to you just a few short years ago.
Here is a great tool you can use to see just how much money you can save in the long term by deciding to buy now as opposed to continuing to rent. You can plug in your own numbers including what you currently pay for rent. Experiment with different prices and interest rates and see the difference.
If you are considering buying a Maine home, please feel free to call me and I will gladly help you through the process.