Nashville is booming right now with people from across the country making Music City their new home. This is no surprise, as the job market is attractive for young professionals and recent college grads looking to get their careers started in healthcare, tech, finance and of course, the music industry. With companies like Oracle and other corporate giants like Amazon and AllianceBernstein making the move here, Nashville offers a robust job market that’s attractive for those looking to kick start their careers.
High-paying jobs bring people and they’re looking for places to live, this is part of the reason the housing market in Nashville is on fire right now. If you’re a young person or first-time homebuyer, you may be asking yourself: when will I know when it’s time to make the move from renter to homeowner? The short answer is now. Despite the increased competition, values continue to climb and mortgage rates are at historic lows.
With values going up and mortgage rates staying lower, it’s also important to remember the value that a home brings. For example, we know that homeownership is one of the most effective ways to build wealth through equity on your home.
These factors have many buyers competing to break into the housing market while it’s still more affordable to borrow than in years past, combined with the fear that the same house will cost more next year than it is currently.
If you’re currently renting or considering homeownership, let’s start by looking at the big picture: what is equity and how will it be built?
Equity is the difference between what you owe on a home mortgage and what the home is currently worth. With property values increasing at higher-than-average rates, it is easier to build equity versus a market with declining home values such as the 2008 crash.
For instance, when paying $1,800 per month in rent — at the end of three years you will have paid $64,800. That same $1,800 per month mortgage will have yielded the average homeowner over $50,000 in equity in their home in the same amount of time.
Assuming a 5% increase year over year, after seven years, the amount you paid in rent would be almost identical to the amount of equity earned at around $151,000. That equity in turn can provide a significant down payment towards your next home.
You may be thinking: what if I don’t have a sizable amount of money to put toward a down payment? We often hear that to purchase a home, you need to put 20% down. This is a common misconception and the good news is that loan programs are varied and there may be one that is perfect for you.
While more money down gets better rates, if you speak with your lender about what options are available with less money down, you may be surprised to find you do qualify to purchase a home. Condos are less competitive than single family homes in the current market, and if you have enjoyed renting in a condo, consider purchasing to begin building equity.
Wealth building through home ownership isn’t typically what you see on TV, but the slow and steady contribution toward the principle on the loan most homeowners have. Even if things are tight, if you pay just $5 more toward your principal on your mortgage payment every month — any little bit over the minimum payment helps get your balance down faster, thus building equity faster.
Making the move from renter to homeowner is a huge decision with several variables to consider, but the long-term benefits are beneficial to your overall wealth. If you’ve been thinking about taking the next step and becoming a homeowner, you’re not only saving money in the short-term, you’re building your wealth over time. With mortgage rates low and values increasing each day, now is the time to make the move. The next step to take is to call a Realtor and Nashville has a roster full of qualified Realtors who are ready to make you a homeowner.
Collyn Wainwright became licensed in 2007 and was the Director of Recruitment at Village for two years, becoming the principal broker in 2020. Wainwright is a graduate of Greater Nashville Realtors Leadership Academy, has served on the Professional Development and Professional Standards Committees and is a board member of Greater Nashville Realtors.