Mortgage rates are still hovering about 7 percent, which is high in comparison to the 2.5 to 3 percent rates we had just a few years ago. As such, many homeowners that purchased their homes with a low rate mortgage are hesitant to sell, even when they need to move.
When faced with that situation, instead of selling their homes and losing their mortgage rates, many owners are opting to rent out their properties instead.
But what are the pros and the cons of renting your home rather than selling it?
A recent article from realtor.com took a deep dive into the trend of renting vs. selling, including:
- Why does renting vs. selling make sense right now? As mentioned, many buyers purchased their homes when interest rates were low, and buying a new home today when interest rates are higher means higher housing costs. Keeping their properties and renting them out creates a steady stream of monthly income, which can not only cover the mortgage of their old property, but also help to contribute to the expense of their new home, when priced correctly.
- What are the benefits of renting vs. selling? There are several benefits to renting out a property vs. selling. But one of the main advantages is that you create a steady, consistent income stream, and your tenants’ rent payments can help you pay off the home and build equity, increasing your net worth.
- What are the potential downsides? While renting vs. selling offers a number of benefits, it can also have drawbacks. For example, if you don’t sell your current home, you won’t have the cash to put towards the down payment on a new home, which means you’ll have to take out a larger mortgage on the new property. Plus, the process of screening tenants and managing properties can be stressful and time-consuming, and there’s always the risk that a tenant could damage your property.
Deciding whether to rent out your home or sell it hinges on your personal financial situation and long-term goals. Renting out your property can provide a steady income stream and allow you to maintain your favorable mortgage rate, which can be especially valuable when current interest rates are high. It also offers the opportunity to build equity over time and potentially help with costs associated with a new home.
However, renting out your home comes with its own set of challenges. You may need to manage tenants and maintain the property, which can be time-consuming and stressful. Additionally, renting means you might not have the cash for a larger down payment on a new home, potentially leading to a bigger mortgage.
Ultimately, weighing these pros and cons will help you make an informed decision that aligns with your financial goals and lifestyle preferences. If you're unsure, consulting with a real estate professional can provide tailored advice to help you navigate this choice.
