If you live in the City of Chicago, it is almost impossible to walk even a block without noticing massive new residential projects towering above you. It seems that everywhere you turn, there are cranes and construction crews completing some of the City’s newest and sexiest projects. The amount of construction would lead one to believe that the apartment market is overbuilt and there will soon be too much supply, causing mass vacancies and an ensuing decline in rental rates. Unfortunately for renters, this is not the case.
People are renting apartments at a record pace and rents continue to rise in the City of Chicago. According to Integra Realty Resources, the average monthly net rent at Class A apartment buildings rose 5.7% year-over-year in the second quarter. Developers have completed more than 13,000 downtown apartment units over the past four years, and the demand for new apartments is actually keeping pace with the supply.
The rabid apartment rental market and some big changes in the mortgage market have combined to make the rent vs. own decision a simple one. OWN.
In most markets, including Chicago, the monthly cost of home ownership is cheaper than the monthly cost of rent. In addition to lowering your total monthly expenses, there are some significant tax savings afforded to homeowners that are not available to rents. Namely, property taxes and interest payments can be itemized and used towards tax deductions.
There is also a significant and important argument to be made about building equity in a home. At a rent of $2,000 per month, you would spend a total of $120,000 over a 5-year period and $240,000 over a 10-year period. This is money being spent that does not build equity or accrue any value to the spender. On the contrary, spending money on a mortgage each month will go towards building equity and creating ownership and value in a piece of real property. As time goes on, a higher portion of each payment goes towards the payment of principal (also known as the build-up of equity).
Many people fear the mortgage process because they remember the Great Recession and financial crisis of 2009 & 2010. The mortgage industry has significantly evolved over the past decade and there are new companies and tools that simplify the mortgage process and reduce the headaches associated with getting a loan. Mortgage servicing companies, such as loanDepot, have grown and become the most convenient location to get a loan. They offer rent vs. own calculators to analyze your decision (https://www.loandepot.com/mortgage-calculator/rent-vs-buy) and have local professionals who can walk you through every step of the process and explain your options. The down payment can range from as little as 3% of the purchase price depending on your situation and you can choose a fixed interest rate to offer stability or a variable rate to keep payments as low as possible in the short term.
Renters in the City of Chicago should take the time to seriously examine how they too can benefit from the current development boom.
Content provided by Women Belong member Samantha Smolin