It sounds too good to be true, but can I really buy a house in Denver for less than I am paying in rent? With these interest rates so low right now, the answer more often than not, is in fact, yes, you can buy for less than you are paying in rent. How could this be you ask, it all has to do with the interest rates and prices being so competitive in Denver right now.
Ever since I have been in Real Estate, I have heard agents and lenders throw this phrase around, "you can buy for less than you rent." Sometimes that proved to be true, but when interest rates were at 6%, it wasn't always the case. But welcome to 2010 and interest rates in the 4 to 4.5% range. Now payments start to change dramaticallyand this whole buy verse rent scenario starts to make a little more sense.
The best way to show how this works is to look at some examples. The first home we will look at is an almost new corner townhome in Olde Town Arvada at 5443 Water Tower Promenade. Comparable homes in this area rent for around $1,400 a month. If you were to buy, your total monthly payment would be around $1,409 a month. This takes into account an interest rate I was quoted this morning of 4.15%, principal, interest, private mortgage insurance, taxes and HOA's. This would be a conventional, 30 year fixed mortgage with the standard 3.5% down.
While buying would cost you $9more a month out of pocket, this doesn't take into account the interest you can write off on your taxes each year which turns into a significant savings, along with the huge potential for this home down the road to appreciate. Since this home is located just two blocks to a future light rail stop, and has already appreciated 17% since it was built five years ago, the future return looks very promising for this home, for the same price you would be paying in rent.
Taking a look at another example, let's look at 2030 Lowell. This charming 2 bed, 1 bath rowhome with yard and 2 car garage just one block to Sloan's Lake is a terrific buy at $155,000. A home like this would probably rent immediately for $1,200, but let's say $1,100 to be conservative. After factoring all the monthly expenses the same as above, your monthly payment if you were to buy would hover around $1,050 a month. Again this doesn't factor in the tax deductions for interest paid or the long term growth of this area, especially since Sloan's Lake is iin the process of being renovated and transfomed into one of Denver's top parks.
While you may not be saving fistfuls of money each month by buying instead of renting, you can see how it is possible tobreak even and even save slightly each month. Once you factor in the tax savings, the long term appreciation potential, the fact that the money you pay each month is actually paying down the mortgage and not just disappearing into your landlord's pocket, all begins to add up.
And all of this is based off today's rents. Keep in mind that the apartment vacancy rate is the lowest it has been in Denver in the past ten years and with no new apartments being built, the vacany rate is only going to go lower, creating higher demand, and in turn, higher rents. By locking in a mortgage today at these insanely low rates, rising rents will be another thing you will never have to worry about again. There are countless examples across our city of how buying can outweigh renting. Talk to your agent and lender about it and make sure to take advantage before it is too late.
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