It’s Time to Escape the Rent Trap

If you rent a condo on Oahu, chances are your monthly rent went up in 2021. With an average monthly rent of $2,132, Oahu renters will shell out more than $25,000 this year on rent! If rising rents have you considering making the move to homeownership while mortgage interest rates are near historic lows, read on.

“When you think about it, you’re going to pay a mortgage whether you rent or own your home,” says Realtor-Associate® Shari Motooka-Higa, who leads Locations’ First-Time Homeowner Seminars. “The question is, whose mortgage do you want to pay: yours or your landlord’s?”

Motooka-Higa says that in her experience, the most common reasons people have for renting are either:

• They don’t think that they can afford to own a home

• They are waiting for housing prices to fall. “The truth is,” Motooka- Higa says, “for most people, if you can afford to rent on Oahu, you can probably afford to own on Oahu.”

With interest rates near historic lows, a typical loan payment is closer than ever to equaling your rent payment. In some cases, your monthly loan payment could be lower than what you’re currently paying in rent — especially once the tax benefits are considered, says Motooka-Higa.

If you’re still hesitant because you’re worried you won’t have enough savings to make a down payment, you should know that there are many financing options available that allow you to put down as little as 3% — or less — of the home’s value. If you qualify for a VA or a USDA Loan, you are not required to make a down payment at all. There are even loan programs that are aimed at helping firsttime homeowners. If that’s still not enough to convince you, first-time homeowners may be eligible for special tax savings, too.

If you fall into the second camp of renters who are hoping home prices will come down, you’re betting on a costly — not to mention, unlikely — gamble. Oahu single-family home and condo prices are expected to continue their steady rise, and as home values rise, rent tends to follow. The median price for a condo on Oahu in July 2021 was $467,500. Ten years ago, it was $300,000. In that same period, the average monthly rent for Oahu condos increased by $600 — an increase of 46%.

So, if you’re still watching the market and waiting for the right time to jump into homeownership, ask yourself if you’re prepared for your rent to double every 10 years. You may find that it makes more sense to lock in a monthly loan payment now for the next 20 to 30 years. Remember, when you take out a fixed-rate loan, your monthly payments will always stay the same — even as rents continue to increase.

And if you’re still on the fence about the value of owning your own home, keep in mind that it’s hard to put a price on the peace of mind that comes with homeownership. With Hawaii’s high home prices, landlords often decide to sell their rental properties with very little notice, leaving tenants to vacate their units quickly. When you own your own home, you can stay in it as long as you like. You can also paint your living room any color you want and have your pets (be sure to verify a condo’s pet policy before purchase).

If you’re new to the homebuying process, Motooka- Higa suggests educating yourself before you jump in. Locations offers a free, virtual First-Time Homebuyer Seminar that covers the benefits of homeownership, home financing strategies and special tax savings for first-time buyers.

“You won’t know how much home you can afford until you take the first step to find out what price range is most comfortable for you,” advises Motooka-Higa. “Attending Locations’ free seminar for first-time buyers is a good place to start.”

To learn more, register for our free First-Time Homebuyer Seminar at locationshawaii.com/seminar. Motooka-Higa offers a Japanese-language version, too.