With Seattle rents rising steadily in 2017, a lot of renters in the area are now eyeing homeownership as a possible alternative.
And here’s an important point to consider. Home buyers who use fixed-rate mortgage loans to buy a house can enjoy a monthly payment that never goes up. The same cannot be said for renting a house or apartment.
Would you be better off buying a home in Seattle with a fixed-rate loan, or continuing to rent? Here’s some information to help you decide.
Seattle Rents Rising Faster Than Most Cities
Seattle-area rents are still rising. A lot. According to a pair of reports issued back in March of 2017, Seattle rents were up by 8.3% from the same month last year. By May, the year-over-year rental increase had shrunk to 5.2%. But the point is, they’re still moving north at a good pace.
And it’s not just in Seattle proper. Rising rents are a common trend across the entire metro area. Just last month, the rental data website Apartment List published a report that showed Tacoma, Washington had the second-highest increase in rent prices, of the nation’s 100 largest cities. The average rent in Tacoma rose by nearly 7% over the last year or so (as of May 2017).
New construction should bring additional rental units onto the market over the coming months, and into 2018. But probably not enough to reverse the trend of rising rents in the Seattle area. It’s a market reality: rental prices will likely continue rising, on a year-over-basis, for the foreseeable future.
Rising rents have prompted many Seattle-area renters to explore the possibility of homeownership. There are a lot of variables to look at when considering whether you should rent or buy a home. Monthly costs are one of the most obvious factors.
But here’s something a lot of renters don’t consider. When you buy a home using a mortgage loan, you have the ability to “fix” your monthly housing payments so that they stay the same. This can be done by using a fixed-rate mortgage loan.
Fixed-Rate Loans Allow You to ‘Lock’ Your Monthly Payments
A fixed-rate mortgage loan is exactly what it sounds like. It is a home loan with an interest rate that remains fixed — or unchanging — for as long as you keep it.
For example, the 30-year fixed mortgage carries the same interest rate for the full 30-year repayment and amortization period. Unless, of course, the homeowner sells or refinances the home before then, in which case the original loan is replaced with a new one.
Consider the difference:
- Seattle rents have been rising steadily, and they could continue along an upward trajectory for the foreseeable future. We don’t really know what they’ll do in the coming months, so there’s a lot of uncertainty.
- A person who buys a home in Seattle using a fixed-rate mortgage loan will have the same monthly payments for as long as he or she keeps the loan. There are no surprises down the road. In terms of cost, it’s a more stable and predictable housing situation.
A distinction should be made here. Some home loans have an interest rate that can change over time, usually once per year. These are known as adjustable-rate mortgages or ARMs. But a fixed mortgage lives up to its name, keeping the same interest rate for the full repayment term.
Of course, there are pros and cons to all types of home loans. But if you’d like to combine the joys of homeownership with a monthly housing payment that stays the same, consider using a long-term fixed-rate mortgage.