Buy or Rent a Home
Considerations Before Making the Move
Deciding whether to buy or rent can be difficult. Your lifestyle, financial situation and long-term plans should all factor in to your decision. Oftentimes, the amount of money you spend on rent each month ends up being as much as — or even more than — a monthly mortgage payment. If you decide to rent, your money won’t be an investment in equity. You won’t get it back if you decide to move because you’re not selling your home, and you can’t borrow against it for special purchases or emergency expenses because you’re not building equity. It’s just gone.
Buying may be a better choice. Purchasing a home instead of renting gives you numerous advantages, including:
Appreciation. Homes are a long-term investment. Many homes increase in value as the debt attached to them decreases, and many types of improvements can add to the total value. With renting, what you see is what you get, and there’s no return on investment if you leave.
Ownership. By purchasing a home, you’re investing in an asset over time — an asset you have a stake in. When your loan is paid off, you’ll own your home and have equity in it. By renting, you’re simply paying landlords and property management companies for using their assets.
Equity. When you build equity, you’ll eventually have the option to borrow against it to gain access to funds for improvements or major purchases through certain programs.
Stability. Rent costs can change dramatically, but with a fixed rate mortgage, your payments will stay the same each and every month throughout the term of your loan.
Deductions. Mortgage interest and property taxes are usually tax deductible. Other aspects like points and application and appraisal fees may also be deductible. Consult a tax advisor for further information.
Renting vs Buying a Home
Renting is a great way to set yourself up for homeownership:
- Renting gives you time to save for a bigger down payment and make sure you’re ready for a long-term commitment.
- Paying your bills on time improves your credit and increases your chances of being approved for a mortgage.
- Renting until you become established in your career helps you present a stable employment history when you apply for a mortgage.
- Reaching a steadily increasing salary level while renting can positively impact how lenders perceive your ability to repay a home loan.
When the time comes, buying a home is totally worth it:
- With a fixed rate mortgage, you’ll know what your payment toward the principal balance will be for the life of the loan.
- Many homes increase in value as the mortgage debt goes down, which adds to the amount of equity and your personal net worth.
- If you itemize your deductions on your income taxes, you can deduct the mortgage interest and property taxes you paid.*
- When your mortgage loan is paid off, you can take pride in the fact that your home is yours and you honored your financial obligation.
*Consult a tax advisor for further information.
If you’re tired of renting and want to start investing in your future by buying a home, but are unsure if it will make financial sense, contact us for a more in-depth calculation based on your specific information.