Why any interest rate is a good rate for renters


Realtor colleagues, we all have friends or acquaintances who are currently renting and should be homeowners. Perhaps they’ve voiced concerns about buying a home right now, especially given today’s higher interest rates. Perhaps they are concerned about prices relative to where they were just a few years ago. 


They might be thinking, “I’ll wait until the rates drop,” or “I’ll wait until the market crashes and prices come down.” But as real estate professionals, we know a ‘crash’ in the market with rock-bottom pricing is not particularly likely (as we discussed here and here). We also know there are compelling reasons to buy a home, even in a higher interest rate environment. 


But how do we communicate those reasons? Here are three key points you can use to educate your renter friends and acquaintances on considering homeownership today:


1. Gain Control Over Your Living Situation

First and foremost, owning a home grants you unparalleled control over your living situation. Unlike renting, where the fate of the place you lay your head rests in the hands of a landlord, owning a home means having a fixed housing payment (no more rent increases!) and the freedom to make property improvements. Homeowners never have to worry about their lease not being renewed! Essentially, it’s a chance to take greater command and control over your own life.


2. Homeownership as a Path to Wealth

Renting might feel like a safer, more flexible option to some, but did you know that homeownership is often the first step toward accumulating wealth? Each mortgage payment not only covers interest but also contributes to the home’s principal. This, coupled with potential tax benefits and the chance for property appreciation—either naturally or through home improvements—makes homeownership a powerful wealth-building tool. The figures speak for themselves: A 2020 Federal Reserve survey revealed that the average net worth of renters stood at $6,300, whereas homeowners boasted an average net worth of a whopping $225,000. 


3. The Reality of Interest Rates 

Yes, we’re in a higher interest rate environment, but here’s a perspective shift for your renter friends and acquaintances: “Marry the house, date the rate.” Buying a home is a long-term commitment to building wealth, while interest rates can fluctuate and even drop. When they do, there’s always the option to refinance, thereby actually lowering your monthly payment. And for those renters balking at higher interest rates? Remind them that while they might be concerned about a 7% or even 8% mortgage rate, they’re effectively paying 100% interest on their rent as they are building no equity!  


What if they say something like, “I don’t want to pay a mortgage”? Well, here’s your response: “Everyone’s paying a mortgage. You can pay yours or you can pay your landlord’s. The choice is yours.”


One Final Thought  

One final thought to consider when you are discussing renting vs. owning with renters: remember that none of us wants to be wrong, and finances are personal. If you are discussing the prospect of homeownership with a curious renter, be sure to approach the conversation with curiosity, respect, and patience.