Buying a home versus renting is a big decision that takes careful consideration. While there are several biased sources that can make arguments for or against owning a home, we’ve found that most home buyers base their ultimate decision on emotion. Or course there are some benefits to owning a home. Tax advantages to name one, as well as the potential to earn equity or pay a mortgage note off after several years. Buying versus renting home is a big decision, let’s discuss some of the pros and cons of each.
Benefits Of Renting:
Lower Up Front Cost:
Unless you’re able to qualify for a mortgage loan with zero down and have your closing costs paid for by the seller, a typical investment to purchase a home is around 3.5% – 7% of the purchase price for down payment and closing costs on an FHA home loan The amount goes up to an average of 10% – 20% for a home secured by a traditional conventional mortgage. Some mortgage programs today like USDA Rural Housing still allow home buyers to move into a home with no down payment and very little money out of pocket. However, the USDA loan has certain eligibility criteria that must be met. Compared to the cost of about 1-3 month’s rent payments, it’s obvious that renting a home makes financial sense in the short-term.
Low Qualifying Standards:
While the Government loans like FHA, VA and USDA have more flexible credit qualifying guidelines than most traditional home loans, there is certainly a lot less paperwork and personally invasive probing required by most landlords and property management companies. Generally proof of job & income, credit history and a deposit is all that is needed to rent a home. You can find a rental home or apartment and move in same day in most cases.
Freedom To Move Around:
It’s easy to find a home through a reputable property management company, move in that weekend and then leave a year later when the rental contract expires. Not being tied down by a long-term mortgage liability is ideal for people new to a community, in a career that keeps them on the go or for parents with children that prefer a certain school district. Plus, if you’re planning on moving in the next 3-5 years, then it may become cost-prohibitive due to the amount of equity you’ll have to gain in the short-run just to cover the cost of paying an agent, buyer closing costs, transfer taxes so that you can at least break even at closing.
Less Maintenance and Cost:
If something breaks like a water heater, AC unit or appliance – simply call to the property manager and they will generally solve the issue in a few days. Plus, renters don’t have to carry expensive homeowners insurance, pay property taxes or worry about interest rates adjusting.
Home Ownership Benefits:
Freedom To Change Things:
Don’t like the color of the walls? Change it they way you like! And depending on whether or not there is an home owners association, you could probably do the same thing on the home’s exterior. Landscaping, flooring, built-in shelving… it’s your property to renovate and make your own.
No Restrictions For Pets:
Well, according to the rules and regulations of your county or neighborhood HOA, you can pretty much have as many domestic and exotic pets without having permission or paying extra deposits. It may seem like a funny benefit to mention first, but the millions of dog and cat lovers would definitely rank this towards the top of their list.
The only way you would be forced to move is if the bank forecloses on your property due to a default on the owners mortgage.
By owning your own home, you don’t have to worry about a landlord’s financial ability to make mortgage payments on time. Plus, you can stay in your own property as long as you wish.
Tax Deductions –
The US government has created certain tax incentives making it possible for many homeowners to exceed the standard yearly deduction.
The following three components of your home mortgage may be tax deductible: Interest on your home mortgage – Property Taxes – Origination / Discount Points paid to mortgage company.
Remaining in one neighborhood for several years lets you and your family establish lasting friendships, as well as offers your children the benefit of educational continuity.
Appreciation of Property:
Historically, even with other periods of declining value, home prices have exceeded consumer inflation. From 1972 through 2005, home prices increased on average 6.5%, according to the National Association of Realtors. Most experts agree, over the long run a home is good investment.
Increased Net Worth:
Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $185,000. While the available tax advantages and potential for earned equity are generally highlighted by most industry professionals as the top reasons to own real estate, it’s important to remember that markets go through cycles. However, owning real estate that appreciates more than the rate of inflation may help contribute towards your overall investment portfolio, provided your maintenance and mortgage costs are kept low.
Questions about getting approved for a home purchase? Talk to us today about the latest first time buyer programs designed for renters. Just submit the Quick Contact Form on the right side. You can also call ph: 800-743-7556 or visit www.UsdaMortgageHub.com. Mobile phone users can find the Quick Contact form at the top of their page.
Buying versus Renting Home 2016