CNN/Money has reported that rents are about to skyrocket across America. What does that mean?
•Those currently paying $1,000 per month in rent could be paying over $1,250 or more in five short years; and
•Your rent could double in just over ten years.
Did you know rents rise as much as five times as fast as mortgage payments?
Many renters do not understand that mortgage payments do not rise as quickly as rents. This is because only a small portion of the mortgage payment — real estate taxes and insurance — is subject to inflationary pressures. The majority of the payment, principal and interest, can be fixed for up to 30 years.
For example, assuming an 5.0% rate of housing inflation and a $1,000 starting payment–
| Year | Mortgage Payment* | Rent |
| Year 2 | $1,010 | $1,050 |
| Year 5 | $1,055 | $1,275 |
| Year 10 | $1130 | $1,650 |
*Note that this analysis does not even take into consideration the fact that the mortgage payment is tax deductible and rent is not. This additional tax benefit can lower your payment cost by 15% to 35% on the mortgage, depending upon your tax bracket.
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