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Why are you still renting?

Buying a home vs. renting is a big decision that takes careful consideration, as most people will agree. But the rewards of home ownership are great. Over time, purchasing real estate has been considered a profitable investment and if you don’t believe me ask your parents how much they paid for their first home. Home ownership is an achievement that offers a sense of pride, financial stability and potential tax advantages.

 

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment and secure their financial future.

 

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase about 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

 

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates  and monthly mortgage to drop.

 In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments, property taxes and mortgage insurance in most cases are tax-deductible. 

To find the loan program that is right for you, I will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let me know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of Government mortgage programs require the borrower to provide less than 3.5 percent of the loan amount as down payment and in some areas no down payment is required.  With most of these government loan programs the seller is allowed to pay for your closing costs letting you purchase your home with very little of your own money.

 

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat and with home prices at their lowest level in years think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.