We understand that buying a home might not be a viable option for some people, but there are so many benefits to buying a home instead of paying monthly rent that you may not know about!
Our experts at Penny Lane Financial can connect you with awesome realtors and can help you find a mortgage that works for your needs. We can also make sure you're covered with renters and homeowners insurance. Whatever you need, we're happy to help.
So, why should you buy a home instead of continuing to rent?
You Can Do Anything You Want With the Property. This includes having pets!
Okay, this one is a bit obvious, but a good reminder regardless. Owning your home means you have the power to change anything you want. This could be painting your kid’s room, changing the floors, or getting a new light fixture without having to ask permission from a landlord. Oh, and most importantly, you can have pets with no extra costs or repercussions!
Appreciation Benefits, Including Leveraging of Cash Invested
Owning a home is an investment many people understand a bit better than buying stocks, because they get the tangible benefits of living in the home. Buying a home is a financially responsible investment that more likely than not, will pay off. As a home appreciates, it accrues faster than a stock might because you get the appreciation of the entire home’s value, not just the gain of your down payment cash invested.
For example, 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.
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 the 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. Woah.
Mortgage Costs Stay the Same As Rent Rise
If you get a fixed-rate mortgage on a home purchase, your mortgage payment can never change. There is a risk of rent rising every year if you do not live in a rent-controlled building or neighborhood. Since the mortgage payment is the bulk of the owner’s housing payment, this creates a lot of budget stability. It is important to note that both owners and renters have insurance (though insurance isn’t required for renters), and that fees can change slightly every 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.
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 benefit the owner, whereas the entire portion of a renter’s monthly payment is going to a landlord.
Source for post: https://www.zillow.com/mortgage-learning/buying-vs-renting/