Buying Vs. Renting A Home
Buying a home is a big decision. When deciding on either buying or renting a home, you have a lot to consider. You might have a list of pros and cons that you are reviewing or you may think that buying a home is simply out of the question. Join us as we explore the reasons that renting may end up costing you more than you think!
1. Build Your Equity
When you purchase and own a home, you will build equity over time. A portion of your monthly mortgage payment goes towards your loan’s principal, which determines how much of the property you actually own. As you are paying down your loan’s principal, you have options along the way. Once you reach 20% equity of your total loan, you will have options such as taking out a home equity loan or refinancing your loan for a lower interest rate or different type of loan to discontinue paying mortgage insurance.
Another option that you have as a homeowner are making home improvements to increase the value in your home, which would increase your total equity. Improving curb appeal, making small upgrades in your kitchen or bathrooms or adding some low-maintenance landscape to the backyard will do wonders for your home value! As a renter, you will not have any of these options.
Contact Guild Mortgage for questions on equity and what you qualify for today!
2. Tax Benefits
There are many tax benefits available to homeowners, depending on several factors. Each state is different as well, so make sure to check with your lender and real estate agent on what to look for in your federal and state tax guides once your a homeowner. Here are two of the more common exemptions:
Homestead Exemption. Many states exempt owner-occupied homes (homesteads) from a portion of the property tax burden that would normally accrue. For instance, Louisiana exempts the first $75,000 of a home’s value from property tax assessments, so a $200,000 home in New Orleans is taxed as if it were worth $125,000.
Federal Tax Deductions. If you itemize your federal income taxes, you can deduct your property taxes and the interest paid on your mortgage, reducing your overall income tax burden (often substantially). This particularly benefits those in higher tax brackets.
These benefits aren’t available to renters.
Contact Fairway Independent Mortgage for questions on tax benefits and what you qualify for today!
3. Sense of Community
Statistically, homeowners tend to stay in one location for longer than renters. This can really help establish a sense of community for you and your family in the neighborhood that you live in. It takes time to build relationships and get to know those who live around you. The longer you reside in a home, the more connected you become with neighbors, local events, schools, churches and nearby recreation. "Plugging in" can give us a sense of belonging, which is a great feeling to have!
4. The Future Possibilities
When you own a home or property, you always have the option of turning it into a source of income. This can partially or totally offset your mortgage, tax, and insurance payments on it.
The easiest way to do this is by renting out part or all of the property, provided you follow all local rental property laws. You might rent out a bedroom or guest house to a friend, live in one unit of a duplex and rent out the other to strangers, or purchase and move into a second home, leaving your entire property free to rent. You can also plunge into the sharing economy and take in short-term renters via Airbnb, VRBO, or another house-sharing platform.
Contact The Amy Jones Group to talk about the benefits of owning a home!
5. Comfort & Security
The future of a rental property can be uncertain in several ways. If the owner of the property decides to sell, this may cause issues with your living arrangement. You might end up having to move or deal with a new landlord that you do not care for. While most jurisdictions have generous renter protection laws that prohibit landlords from evicting without cause and require adequate notice (typically 30 or 60 days) that tenants won’t be given an option to renew their leases, no law entitles you to remain in your rental unit indefinitely. Landlords can also choose to raise the rent each year, leaving you in a bind for your monthly payments. Homeowners don’t face such uncertainty. They can remain in their homes as long as they stay current on their mortgage payments.