Rent or Buy?

20 Feb 2018, Posted by 1st Residential Funding in Buying a Home

Should you buy or rent? This is not always a simple answer, as factors like how long you plan to be in an area or the housing costs of a location must be taken into consideration. Each situation is unique and each decision is a big one! We at 1st Residential Funding believe it is critical to consider your long-term financial goals when making such an important decision.

As you consider the long-term stability of your family, we believe three factors tip the scales for many renters to move into home ownership:

Pay Yourself Instead of Your Landlord

When you pay rent, you are paying your landlord’s mortgage. However, when you have a home mortgage, you increase your degree of ownership in your home with every payment. A good rule of thumb is that if you intend to stay in your property for at least four to five years, the costs of purchasing are more likely to be offset by accrued equity and increased value.

Bottom Line: Why do you want to continue to throw money away when you can invest it?

Force Yourself to Save

You have to live somewhere, so you might as well pay yourself to live in your house. You might as well save money by building equity in your home. As you spend money to update your home, you are paying yourself. As you spend money to take care of the yard, update the kitchen, or change the light fixtures, you will be investing in a property that can pay you back.

Bottom Line: Each mortgage payment or update to your home is like forced savings.

Consider the Tax Implications

Did you know that homeowners may deduct mortgage interest and property tax payments as well as certain other expenses from their federal taxable income? Additionally, homeowners may exclude, up to a limit, the capital gain they realize from the sale of a home.

Bottom Line: The tax benefits of home ownership can save you thousands of dollars each year.

As a mortgage lender, I often see renters concerned about the downpayment, but by the time potential renters pay first and last month’s rent (as most landlords request) they could have paid a downpayment! With conventional loan programs that allow a buyer to put only 1 – 3 % down, those renters could have been moving into their own home and paying themselves, saving, and getting the tax break from home ownership.

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