Sep
14

Buying a Chicago New Home is Cheaper than Renting

September 14, 2012

chicago new home buying cheaper than rentingA new study by Trulia reports that purchasing a home is now 45 percent less expensive than renting. The main reason for this? A combination of rising rents and low lending rates.

This percentage applies to every single one of the 100 largest metros in the country, which includes the Chicago new homes market.

So how much do homebuyers save per month versus renters? The answer is a total of $771 per month. This number assumes that buyers qualify for a 3.5 percent mortgage rate, plan on staying in their home for seven years and are in the 25 percent tax bracket and have taken advantage of homeowner benefits. Lastly, the amount of savings is also based on the assumption that buyers put down 20 percent on their new home.

Yet homeowners don’t need to fall into all of the above categories in order to save on housing costs. Even if buyers stay in their homes for less than five years or only qualify for a 4.5 percent mortgage rate, buying will still turn out to be cheaper than renting.

The cost savings of buying versus renting can easily make one wonder why home sales aren’t even higher. Due to the recession and unemployment, many renters who wish to own a home are struggling to put away money for a down payment.

However, the housing market will continue to stay more affordable than renting for quite some time. Even if mortgage rates were to rise, buying would still be cheaper than renting in most large urban areas.

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Jessica Thom

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