New research from the real estate website Trulia finds that it's cheaper to buy a Gulf Shores home than it is to rent one. The advantage narrows considerably, however, when the home buyer uses a low-down-payment loan insured by the Federal Housing Administration.
The average cost of homeownership, including mortgage, insurance, taxes and maintenance, is 38 percent less than the cost of renting, according to the latest Trulia data. This is an even bigger gap than last year, when Trulia estimated homeownership was 35 percent cheaper.
Reasons Buying a Gulf Shores Home Is Cheaper Than Renting
One reason for the improved conditions to buy a Gulf Shores home is that the 30-year fixed interest rate for mortgages has been lower this year than last. And the other is that rents are rising faster than buying a Gulf Shores home because of strong demand.
For many people, the down payment is still a barrier to buying a Gulf Shores home. And for people who lost a home in foreclosure, it might still be a while before they can buy. Even though it's a good time to buy a Gulf Shores home, many renters are stuck in place. 74 percent of renters have incomes below $50,000, compared with 41 percent of homeowners.
58 percent of renters said they would be unlikely or unable to come up with $2,000 within 30 days to cover an unexpected expense — never mind a down payment to buy a Gulf Shores home to start with.
The reverse is true for a typical Federal Housing Administration loan with 3.5 percent down, which requires upfront and monthly mortgage insurance premiums, and builds equity much more slowly. In that case, the advantage dropped to 25 percent. And in some areas, the advantage was 10 percent or less.
Buying a home with an F.H.A. loan is still less expensive than renting almost everywhere if you plan to stay for at least seven years and can benefit from the mortgage interest tax deduction. But financing a purchase this way could be more costly than renting for more mobile buyers, particularly younger people.
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