Buying or Renting? What Could Go Wrong?

Today we're going to examine a home owner whose house basically doubles in value over the time they live in it, and compare their net cost or net profit at the end. We will talk about when math supports buying instead of renting in this newer, higher interest rate environment. Today's guest is andy taylor, th v p and g m of credit carma home. Andy's a big proponent of ownership as he started a mortgage technology company in 20 15.

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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