These days in most parts of the country, you can purchase a home and pay less for your monthly mortgage than you would pay for rent. That is why ownership is so very popular - you can build equity in your property, and enjoy all of the freedom that homeownership provides, while still paying less on a monthly basis.
However, when looking at online mortgage calculators it’s easy to become confused, as they rarely provide a complete picture of all homeownership costs. In reality, it comes down to more than simply the amount you’ll send back to your lender each month for your loan.
At Midwest Lending, we believe 100% that home ownership trumps renting. But we also believe in total transparency, and in order to see if homeownership is right for you right now, you need to know every expense you will be taking on.
What Does ‘Monthly Mortgage Payment’ Really Mean?
Let's start with the basics. The principle and interest payment for your loan to the lender is not the end of the conversation. You’ll be required to pay property taxes, which you can either roll into your mortgage payment each month, or pay to your city/town directly once or twice a year. You’ll also be required by your mortgage lender to carry homeowners insurance, an amount that will vary depending on the size of your home, your home's location, etc.
The most common option is to pay both your taxes and insurance to your mortgage lender via an escrow account, as part of your payment each month. Your lender will then make the required payments on your behalf to your city/town, and your insurance company. As you can see, you monthly payments include more than principle and interest — but in most instances, ownership is still a better option than renting, financially.
But Wait, There’s More…
Electricity. Trash. Water. Many people pay their own utilities in a rental apartment or condo, but the costs for a single family home can be higher. Water and/or garbage pickup may also be included as part of your property tax bill. These are items you’ll want to double check, in order to avoid being surprised down the line.
Listing these expenses is in no way intended to steer you away from home ownership. Quite the opposite, in fact — a well-informed homebuyer is a successful homebuyer, and will find the greatest value in today’s market. Don't forget that there are also several benefits of home ownership that you cannot put a price on, such as privacy, security, and the freedom to design as you see fit.
We at Midwest Lending simply want to make sure you understand the full cost of ownership, before you make what will likely be one of the largest financial decisions of your life.
This is why speaking with an experienced mortgage professional is so very important. They can help you to estimate what your total monthly payments will be — taking in all known variables — in order to lead you down a safe path toward financial stability. Call us today, and let us show you how ownership can benefit you.