The Economic Cheat Code

It feels like everything is getting more expensive. You see it at the grocery store, at the gas pump, and maybe most painfully, every time you get a lease renewal notice.
While your cash gets hit by inflation and simply doesn’t go as far as it used to, homeowners with a fixed-rate mortgage are quietly riding that wave instead of sinking.
Let’s talk about why buying a home is one of the all-time most powerful financial shields available in the economy, and why getting off the treadmill of renting might be the smartest financial move you can make for yourself long-term.

The Problem with Renting in an Inflated Economy

When inflation goes up, the cost of living goes up across the board. And you can bet your landlord is going to pass their rising property taxes, maintenance costs, and living expenses directly to you. If you’re renting, your biggest monthly expense is entirely out of your control. Even with a good landlord, to an extent you’re at the mercy of the market. 

Not to mention you’re actively paying to protect your landlord's wealth while draining your own. Unlike a mortgage payment, you never see that money you put into rent payments again - that money is just gone. 

So what’s the better way? 

The "Cheat Code" of a Fixed-Rate Mortgage

Imagine if you could have locked in the price of a gallon of gas in 2019, and continued paying that exact same price today, tomorrow, and ten years from now.

That is exactly what a fixed-rate mortgage does for your housing cost.

When you buy a home and lock in your mortgage, your principal and interest payments stay the exact same for the next 15 to 30 years. Even if inflation drives up the cost of absolutely everything else around you, your mortgage payment doesn’t budge.

In fact, as your wages naturally increase over time to keep up with the cost of living, your static mortgage payment actually becomes a smaller percentage of your monthly income. In real economic terms, your housing actually gets cheaper as the years go on.

Riding the Wave of Appreciation

It gets better. Not only is your monthly payment frozen in time, but the asset you live in—your house—is rising in value because of inflation.

Real estate historically appreciates. When the cost of lumber, copper, and labor goes up, the cost to build new houses goes up. That naturally drives up the value of existing homes. As a homeowner, inflation is actually working for you. It’s inflating the value of your property, building your equity, and increasing your net worth without you lifting a finger.

Photo by João Paulo Carnevalli de Oliveira on Unsplash

When Renting is Actually Better

All that said, there are definitely cases where renting is the better choice: 

Short Term or Uncertain Movers 

After you buy a house, it usually takes a few years before you see meaningful equity gain that puts you ahead of where you were financially. So if you’re only going to be in a city or state for 1-2 years, or uncertain whether you’ll stay, you’re probably better off renting. 

Not Enough Savings for Repairs (Yet) 

There’s a reason landlords get away with taking rent payments that the renter never sees again. When you own a property, you’re responsible for fixing anything that breaks in the home. If the furnace stops working in the winter, or the basement floods, you as an owner better be ready to pay for repairs or replacements. 

As a general rule of thumb, we like to see homeowners have a ‘nest egg’ of about $15,000 minimum saved just in case of unpredictable fixes like that. And keep in mind, that $15k is in addition to the money you’ll need for Closing Costs. That might sound like a lot, but the last thing we want is for you to buy a home and then find yourself underwater. If you need to rent a little longer to save money before buying, it might be wise to do so.

Photo by Viacheslav Bublyk on Unsplash

Stop Paying Someone Else's Mortgage

At KNE Realty 360, we’ve helped countless families and veterans in Southeastern Michigan take control of their financial future. We are passionate about helping people stop renting and start owning because we know how the math works out for them in the long run.

Whether you’re exploring conventional loans, or you’re a veteran utilizing your hard-earned VA Loan benefits with zero percent down, the first step to beating inflation isn't scrolling through houses online. It's getting Pre-Approved so when you do find the right house, you’re ready to jump on it. 

Ready to lock in your future?

We're always here to help. When you're ready to see what it actually takes to get into a home of your own, don't hesitate to reach out.

We've got you.

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(248) 429-9383