Top 5 Reasons To Buy a Home vs. Rent

    For many people, owning a home makes more sense financially and from a lifestyle perspective than renting a home. However, some people are still afraid of taking that leap to own their own home  so here are the top reasons people should buy instead of rent.

    1. You Can Do Anything You Want to the Property

    Owning your home means you can do anything your heart desires to the property. You can paint the rooms any color you want, you can take out old, dingy carpets and change them to beautiful, new wood floors, you can add any light fixture to a room without asking a landlord for permission. Any change you make within your property will increase the value of your property.

    2. Appreciation Benefits, Including Leverage of Cash Invested

    Owning a home is an investment many people can understand better than stock investing, because they get the tangible daily lifestyle benefit of living in the home. However, people do not realize the financial benefits of owning a home are more substantial than buying stocks. As a home appreciates, it accrues faster than a stock might because you get the appreciation on the entire home’s value, not just the gain your down payment cash invested.

    For example, Mortgage Learning Center states, “if you bought $30,000 in stock and it appreciated 3 percent per year for three years, you’ve gained $2,782 on top of your $30,000 invested — and if you sold, you’d pay taxes on that money gained. If you buy a $300,000 primary residence with a $30,000 down payment (representing 10 percent down) and it appreciated 3 percent per year for three years, you’ve gained $27,818 on top of your $30,000 invested — and if you sold, you’d be exempt from paying any taxes on that money gained.”

    3. Tax Benefits

    Homeowners are allowed to deduct mortgage interest and property taxes when they file tax returns each year. Using the same example of $300,000 home purchase with 10 percent down, a mortgage calculator shows a total monthly housing cost of about $1,731, with $1,231 in principal and interest (using a rate of 3.625 percent), $300 in property taxes, insurance of $67, and mortgage insurance (required when putting less than 20 percent down) of $133. The tax deductions homeowners get for mortgage interest and property taxes save $335 per month in taxes, so subtract this from total monthly housing cost of $1,731 to get an after-tax housing cost of $1,396. This significant savings from tax benefits can often make owning the same as, or cheaper than, renting (Mortgage Learning Center).

     

    4. Mortgage Costs Stay the Same as Rents Rise

    If you get a fixed-rate mortgage on a home purchase, your mortgage payment can never change. Since the mortgage payment is the bulk of the owner’s housing payment, this creates a lot of budget stability. As for the other costs, both owners and renters have insurance (though insurance isn’t required for renters like it is for owners), and that fee can change very slightly year over year. And while owners have property taxes that renters don’t, and property taxes can rise as the home appreciates, this fee is tax deductible.

    5. Forced Savings

    When a homeowner is making a mortgage payment, a portion of that payment is paying the loan down each month, giving the owner more equity in their home. Using the example of a $300,000 home purchase with 10 percent down, the average pay-down per month in the first year is $423, and the average in the second year is $438, and the average pay-down per month keeps rising each year. This loan pay-down each month is required as part of the mortgage payment, but it’s the owner being required to invest in their own home, so it’s like forced savings that benefits the owner — whereas the entire portion of a renter’s monthly payment is going to a landlord (Mortgage Learning Center).

     

    Considering buying? Take the first step and give us a call for more information: 602.796.2873

     

     

    Courtesy of: https://www.zillow.com/mortgage-learning/buying-vs-renting/

     

     

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