Fixed mortgage rates

In the United States, interest rates and rent prices have increased for years. However, while mortgage rates are finally starting to drop, rent is staying the same or going up in many counties. Is having a fixed-rate mortgage better than paying for an apartment?

The Difference Between Rental and Housing Prices in Utah

In many counties, housing costs are increasing faster than income. According to the U.S. Department of the Treasury, 6 in 10 families who earn $20,000 to $50,000 spend more than 30% of their pre-tax income on housing.

If you’re like most Utahns, you spend more on an apartment than on a house. While experts say you should spend no more than 30% of your pre-tax income on rent, that rule doesn’t factor in rising rent prices or inflation.

Rent in your area will likely be high regardless of bedroom size or square footage. As of September 2024, the average rent in Utah is $1,850 monthly, ranging from as low as $100 to as high as $48,280.

Fixed-rate mortgages — a home loan with a single interest rate for its entire length — are becoming more affordable. Today, the national average interest rate for a 30-year fixed mortgage is about 6.39%.

While mortgage rates skyrocketed during the pandemic, analysts agree they should ease in 2024. They may still be relatively high today, but you’ll soon have an opportunity to get a good deal if you’re in the market for buying a home.

Why Having a Fixed Mortgage Is Better Than Paying Rent

Often, having a fixed mortgage is better than accepting rising rent payments.

  1. Stability

A fixed mortgage means you have consistency. Regardless of what happens to the dollar’s value, you pay the same amount each month. This stability is especially helpful when interest rates are on the rise. Additionally, if you were to rent instead, you’d likely pay a few hundred dollars more each year.

  1. Flexibility

While your monthly payments stay the same, you can occasionally make higher payments to lower your loan’s principal, saving on interest costs. Alternatively, you may be able to refinance at a lower rate if your situation changes.

  1. Equity

Equity is the amount of your home you outright own — your property’s market value minus the amount you still owe on your mortgage. You build equity as you make payments, which can help you get better deals on other loans. Since most real estate increases in value over time, you’re constantly building more. Compare that to renting, where you’re paying monthly but building nothing in return.

  1. Variety

You can choose from several fixed-rate mortgage options. You can take out a 10-, 15- or 30-year loan. The longer the loan term is, the lower your monthly payments, but the more you pay in interest and overall since you pay off the balance over more time. Rent is different — you don’t have options to adjust your payment, and the amount is likely to increase yearly.

Should You Rent an Apartment or Own a Home in Utah?

Today, mortgage payments are still relatively high. For reference, the country’s 15-year mortgage payment is $3,552 on average. Still, if you’re in the market to buy a home, you should consider them. Experts expect these rates to ease up in 2024, and the benefits of building equity and owning a home still stand.

Of course, you should still consider your other monthly payments. For instance, Utah’s average effective property tax rate is 0.45% as of 2024. Your utilities, home insurance and homeowners association fees will vary depending on who you do service with and which county you live in.

Even with all these costs factored in, you may get a better deal on a fixed-rate mortgage. Houses are typically much larger than apartments and have more outdoor space — you often get more bang for your buck.

Plus, when you think of a home as an investment, paying slightly more for a fixed-rate mortgage might not sound so bad — especially when you remember you can choose your loan length and refinance if necessary.

The Bottom Line of a Fixed Mortgage Versus Rent

In the end, your situation is unique. The county where you live, the square footage you get and the amenities offered affect costs. While a fixed-rate mortgage is the best option for gaining stability and building equity, you should revisit your budget before deciding whether to buy or rent.

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