Here is the dicey reality of renting vs buying in Sonoma County

Whether you buy a home or rent a home you will still have a housing payment obligation to make each month. The unfortunate reality in Sonoma County, CA is that in many cases you could be easily paying more in rent than you would for a mortgage. Not everyone who rents should be and not everyone that buys a home should. There are more affordable no and low-down programs today than ever to help those tight on cash get their foot in the door. You may be surprised to learn you can purchase a home. This article is intended for those you can afford to buy a home, but still opt to rent.

Why renting can be financially risky

The fact about renting that is problematic to personal finance is that it is not fixed. When you rent effectively have an adjustable rate mortgage. Rent is not stable and is subject to change based on market conditions and/or as the landlord sees fit. This means after your lease you’re your rent payment is subject change which can be unsettling in creating and sticking to a personal budget.

Renting has more flexibility as in not being tied down to a property. The cost of this flexibility is acceptance to variable housing payment. Similarly, rent can be compared to an adjustable rate mortgage loan. Most residential mortgages originated today are fixed rate loans e.g. for 360month/30years. However, rent is borderline equal to an adjustable rate loan. The adjustable loan product offered today change either once per year or twice per year usually tied to the 12 months or 6 months Libor. The Libor index trails the Fed Funds Rate which is poised to rise in the future. This occurrence will likely be due to our exuberant economy displaying a strong housing market and job confidence. These two factors lead to inflationary concerns the Federal Reserve has maintaining a healthy economy.

Most home buyers people opt for fixed rate mortgage terms even though they are the most expensive because they are the most safe and stable. When you rent a home effectively you have an adjustable rate mortgage tied to the Libor that is never ending.

Not all, but in many cases purchasing a house could make more financial sense in the long run than renting knowing your savings could always be impacted by a rent payment change. If you were to compare the risk of renting to the cost of home ownership and you factor in the forced savings that you receive on amortizing principal and interest fixed rate mortgage, and the tax benefits with the potential wealth accumulation (increased equity over time) there is a good case to make to consider upgrading to homeownership.

Looking to get a mortgage? Get a no cost pre-approval now.

RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

Illustration of two houses side by side. The smaller orange house has a red “For Rent” sign in front, while the larger blue house sits beside it. The background features light clouds, trees, and grass, with bold black text above reading “Renting Out Your Current Home.

Should You Sell or Rent Out Your Current Home When Buying a New One?

Should You Sell Your Home or Keep It as a Rental? When you’re thinking about…

A modern two-story suburban home with blue-gray siding and white trim is shown at sunset, framed by a calm sky and soft lighting. Bold navy blue text over the image reads, “Here’s a Better Way to Think About It,” making it a visually inviting blog post header about real estate strategy.

Thinking of Lowballing Because the House Needs Work? Here’s the Reality.

Here’s a Better Way to Think About It If the home just hit the market—say…

Illustration of a renovated home vs. a home for sale as-is, with "VS." in the center.

Should You Renovate Before Selling Your Home or Sell As-Is?

Should You Sell Your Home As-Is or Fix It Up First? Let’s Break It Down…

Illustration of an orange two-story house next to a green dollar sign, a blue calculator, and stacked coins, with bold text above reading “Income is the key to home affordability,” symbolizing the role of income in determining home buying power.

Why Income Drives Buying Power More Than Credit or Cash

When it comes to buying a home, most people focus on credit scores and down…

View More from The Mortgage Files:

begin your mortgage journey with sonoma county mortgages

Let us make your mortgage experience easy. Trust our expertise to get you your best mortgage rate. Click below to start turning your home dreams into reality today!