Buying
a home can be one of life’s most exciting and
yet most challenging experiences you can go through.
With the numerous loan programs available to consumers
today, it is easier than ever to get into a house. However
the question remains, “Should you own your own
home or rent?”
There are many benefits to owning a home but there
are also just as many tradeoffs. To help you decide
if owning a home is right for you we’ve listed
the pros and cons of buying versus renting.
Equity
One of the most common complaints among renters is the
discouraging feeling that you are simply throwing your
money down the drain. This is typically true for the
homeowner who lives in a specific house for a long time.
However building equity isn’t an automatic universal
truth. In some cases the property values are too high
to start with so the resell just won’t net you
a profit and in other cases the property values don’t
increase at all.
Buying: You build your equity with every payment made.
For the first half of the mortgage, most of each payment
pays off interest. However every month some part does
go towards your principle. Your equity will fluctuate
as the market value of your home changes. Over time
though, history has shown us that building equity in
a home is a smart investment.
Renting: You pay for a place to live, period. While
you have a lease for a certain time period, you are
not investing in the home. The plus side is you have
no responsibility for ongoing repairs but you are also
not building equity. However you are investing for the
landlord. You are essentially making the landlord’s
payment and building her equity.
Monthly Payments
In many cases, and depending on the home that you plan
to purchase, your monthly payments will likely be comparable
to your current rent or quite possibly much higher.
Many first time buyers purchase a “starter home.”
This may be a smaller or an older home that can be purchased
at an affordable cost. As mentioned above you can begin
to build equity in this home and you can then upgrade
to a more expensive home in a few years.
Buying: Costs can fluctuate somewhat on a yearly basis
over the first few years due to escrow adjustments.
After this initial adjustment period, your payment could
be fixed for the remainder of the loan assuming you
opt for a fixed interest rate.
Renting: Costs are fixed at least for the term of the
lease (generally 1 year) but usually increase after
the lease expires.
Upfront Costs
Upfront costs are possibly the most misunderstood aspect
to the home purchase and the one that keeps most renters
from even researching purchase. The perception that
you must have huge down payments to purchase a home
is no longer accurate in most cases today.
Buying: Typically requires a larger investment than
renting initially. However there are many programs that
require very little for down payment.
Renting: Usually does not require as much up front as
buying but still requires fees such as deposit, pet
deposit, 1st months rent and possibly more.
Tax advantages
One of the most advantageous aspects to homeownership.
Buying: There are significant tax advantages to homeownership.
Interest that you pay on your mortgage and property
taxes are all deductible. These deductions can make
a huge impact on your federal and state tax returns.
Renting: Renting offers no tax advantages. Only your
landlord will reap tax benefits that are available.
Other Considerations:
Maintenance
Buying: Any maintenance must be done and paid for by
you. Home maintenance costs average about 1% of your
home’s value per year.
Renting: You typically are responsible for very little
maintenance and maintenance costs when you rent.
Time to Move
Buying: If and when you want to move, you will have
to sell your home first.
Renting: Your only concern is fulfilling your lease.
A Place to Call “Home”
Buying: You have the right to remodel and redecorate
at your discretion. You own it; you can do with it what
you wish.
Renting: You have very little flexibility besides decorating
the home. Carpet, wallpaper, paint, etc are all items
that the landlord will change at his discretion with
little to no input from you.
We sincerely hope this report will be of value to
you in making one of the biggest decisions of your life.
If there is any way we can be of service, please contact
us. We would consider it a privilege to be of service
to you!
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