Buying Vs Renting

Buying Vs Renting

Pros to Buying a HomePros to Buying a Home

1. Building Equity- Over time you build equity. Most mortgages a portion of each monthly payment goes toward the loan`s interest. The remainder pays down its principal. Every dollar you put toward your loan`s principal represents a dollar of equity-actual ownership of the property. Once you reach 20% equity, or 80% LTV, you can tap that equity through a home equity loan or refinance your mortgage to secure a lower interest rate or a longer repay money window. 

2. Tax Benefits-Tax benefits cater exclusively to homeowners. Below are the top tax benefits

            a. Homestead Exemption- Many states exempt owner-occupied homes (homesteads) from a portion of the property tax burden that would normally accrue.

            b. 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.

3. Potential for Rental Income-You can turn your home into a source of income. Rent out part of your property (follow all local rental property laws). The basement, a room or even the whole house and move into a second home.

4. More Creative Freedom-As a homeowner you want your house to reflect who you are! All those DIY project you can do with your home! You have the freedom to do whatever you want to your home! Home improvements are a big one. Paints, counter tops, light fixtures, new bathrooms, updated kitchens are all up to you perfectly how you want it to look.

5. Sense of Belonging and Community-Since homeowners tend to be stable and stay there more than five years you start to feel like you belong there. You are part of a community.

Disadvantages to Buying

1. Potential for Financial Loss- Although home ownership builds equity over time, equity doesn’t equate to automatic profit. If home values in your area decrease or remain flat during your tenure as a homeowner, dragging down the appraised value of your home, you risk a financial loss when you sell. While renting doesn’t build equity, it also doesn’t involve the risk of owning a depreciating asset.

2. Responsibility for Maintenance and Repairs- As a homeowner you are responsible for covering all cost if appliances break in your home or whatever it may be. You will have insurance to help you out. Also repairs you might have in and out around the home.

3. Most Homes Aren’t Sold Furnished- You can always bring your old furniture, but will it fit in the new place and look nice, update? This might require some time trying to decorate your home.

4. High Upfront Costs- Though upfront home buying costs vary greatly depending on the size of the down payment and the value of the home, you can expect to shell out no less than 5.5% of your home’s value (for an FHA loan and relatively low closing costs) before moving in. You could spend well over 20% of the purchase price.

Pros to RentingImage title

1. No Responsibility for Maintenance or Repairs- As a renter if anything happens within the house you are not held reliable for any cost when the house pipes bust, roof leaks or the garbage disposal stops working. All you have to do is pick up the phone to call your landlord.

2. Relocating Is Easier- Less costly to up and move all the time. You can break your lease, but it comes with some costs when it is done.

3. No Exposure to Real Estate Market-Home values fluctuate in response to changing economic conditions and can decline over time. As a renter that is not your problem it si the landlords.

4. Some Utilities May Be Included- Many multi-unit building owners cover the cost of most or all utilities, including non-essentials such as cable television. The practice is less common, but definitely still possible, in smaller buildings like duplexes and single-family homes. By contrast, homeowners have to pay full utility costs, sometimes several hundred dollars per month, depending on dwelling size and usage.

Disadvantages to renting

1. No Equity Building- Every dollar you pay in rent is gone forever. No matter how long you remain in your rental unit or how exemplary a tenant you are, you can’t build equity in the property under a standard lease agreement. If you plan on staying in the same location for more than a few years, buying may be a smarter financial choice than renting.

2. No Federal Tax Benefits- While homeowners can deduct property taxes and mortgage interest on their federal income tax returns, renters aren’t eligible for any housing-related federal tax credits or deductions. Depending on your property tax and mortgage interest burden, this shortcoming can raise your federal tax liability by several hundred dollars per year.

3. Limited Control Over Ongoing Housing Costs-Rental property owners raise rents to match rent increases elsewhere in the market, to compel current tenants to vacate the premises rather than sign a new lease, and for many other reasons.

4. Limited Housing Security- You could be evicted at any point. If rent goes up and you can not afford it you will be asked to leave so they can have new renters in the home who can afford it.

Mario Chavez Headshot
Phone: 970-381-8388
Dated: June 12th 2017
Views: 1,716
About Mario: Welcome to my site! I hope it's a valuable tool for you in your home search, or the sale of your ho...

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