Home

With mortgage rates and rents going up many first time home buyers are asking should I rent or buy. Here in Hastings a two bedroom two bath apartment rents for $1,850 per month while a similar home sells for $300,000. To buy the home requires a 3.5% down payment or $10,500 and that is a stumbling block for most young buyers but the lender will approve a loan if the down payment is provided by a relative most likely a parent or grandparent. This requires a loan of $289,500 at 8% for 30 years or $2,124 per month for principal and interest. Add to this taxes, home owners insurance and mortgage protection insurance of $450 for a total of $2,624. Utilities are usually paid by the renter or homeowner so they are a wash. If the buyer can overcome the two hurdles of $10,500 down payment and the extra $824 per month they are in. This may require help from parents or grandparents but in the long haul things will work out. Rents increase at 2.5% per year so in 10 year the rent will be $2,500 and the home owners taxes and insurance will have increased by $100. The new comparison is $2,724 for home owner and $2,600 for renter. Houses appreciate at 3% so the new value of the home is $403,000 and the equity is $40,000. If relatives want to help a young couple get started this is good pathway. Instead of outright gifts that may be spent on things that do not appreciate, this money will be long term growth. Once these people are in a home they will continue to build equity over their lifetimes and this would be passed on to grandchildren. Many parents and grandparents are sitting on assets that will be passed on at their death. This is a chance to help and allows the donors to participate in the lives of the young people in a productive way. Remember you can't take it with you.