Real Estate Report Says Buying Is More Affordable Than Renting: Could Refinancing Add More Financial Power?

A recent CNN Money report quotes research by online real estate website Zillow.com, which holds that buying a new home is more affordable than renting—if the borrower is willing to “stay put for a few years”.

In today’s economy, staying put doesn’t seem to be much of an issue; once qualified conventional loan applicants, VA loan-eligible veterans, and FHA loan borrowers land secure jobs they seem to be interested in staying put. At least that’s the impression given by the figures published by Realtors® Confidence Index, which lists “relocation buyers” as only 11 to 15 percent of the real estate market.

If buying a home and staying put can be part of a long-term strategy to save money, refinancing the home loan should definitely be on a borrower’s radar for the purpose of saving even more. For borrowers in the right circumstances, a refinance can shave more off the monthly bills and give the borrower the ability to pay more on a conventional, VA or FHA home loan.

Long Term Strategy or Short Term Gains?

The refinance-and-overpay strategy works for borrowers who are in a loan with no penalties for early payoff and who have a financial strategy incorporating that early payoff. But refinancing isn’t just for these long-term thinkers; refinancing with a VA Interest Rate Reduction Refinancing Loan or an FHA Streamline Mortgage Refinance usually means lower payments and interest rates. That gives the borrower more room in their monthly budgets for pressing needs, extras, and vacations.

Buying and staying put, according to CNN Money, pays off for 75% of the 200 metropolitan areas surveyed if the borrower is willing to stay in the home for approximately three years—that’s what the CNN report and Zillow.com term the break-even point. Some markets reach that point faster—two years in extremely good cases. Could “buy and wait” be the more affordable option compared to “rent and hope”?

When you consider adding a refinancing loan to the equation, could your numbers be even more attractive? Much depends on the nature of your refinancing loan, any extras you choose to include (or ignore), and your personal financial goals. But it’s definitely worth looking into.

Rate this item
(1 Vote)

Top Reads This Month

  • FHA Refinance Loans and Interest Rates

    FHA mortgage loan rates and refinance loan rates stayed well below the 4 percent zone in the last days of the year--now that the new year is here, borrowers may not be sure how long the best-execution FHA mortgage loan interest rates reported at the end of the year may last. Do you know whether your’re ready to commit to…