HOW TO PREPARE YOUR HOME FOR SALEMost sellers want to sell their houses at the right prices, but it is good to be realistic as the process entails paying attention to detail and understanding how to
Renting vs. Buying
Renting or buying a home involves a complex decision-making process. However, one important factor to put into consideration when making the buy or rent decision is how long you plan to stay in your home. Most times, renting can be a great choice if you’re planning for a short-term stay in a town, as you wouldn’t want to spend the money to buy a house and other associated costs that come with it. However, if you plan to stay put for long-term, buying may prove to be the better option.
There are many advantages to owning a home. You will have the ability to able to rent it out, sell, or even pass to family members. Being able to write off the mortgage interest and property tax payments, which are both tax benefit that enables you to make a deduction on mortgage interest payments from your taxable income. There is also a feeling of pride that you have accomplished the American dream of owning your own home.
Buying a home is a great form of investment. If the prices of home in your area keep rising, making that purchase now can help you stay in a neighborhood which you might in a few years be priced out of. If you do not choose to stay long-term, an increase in local property values could mean profit for you when you sell.
So, what are some factors to be put into consideration when making that complex decision to either rent or buy? Apart from your finances, there are other non-financial factors you may want to look at as well.
#1: The Financial Impact
To help you make the buy vs. rent comparison, Fidelity recommended running a simple price-to-rent ratio by dividing a home price by the annual rent of a comparable rental unit. If the ratio turns out to be less than 20%, then buying is probably a better bet for you.
On the other hand, if the ratio is greater than 20%, then renting is the better option. There are also some online calculators that would include things like selling costs, insurance, maintenance costs, etc. to help you figure how long you’d need to live in a city to make the buying option the best bet for you.
#2: May Build Equity and Credit
Research has shown that Homeownership has long been a central part of the equation of building wealth. In 2015, the average net worth of a homeowner was $195,400, compared to just $5,400 for a renter, according to the Federal Reserve. The significance is even more staggering for people of color. Homeowners are building equity in an asset which in turn helps to boost their long-term worth. As a renter, paying a landlord each month seems like spending, rather than saving.
#3: Spike in Rental payment
Buying a home gives you continuity every year, and as a homeowner, you would not face any spikes in your payment. This may not be the same for renters, as in some areas, rent prices change drastically over the course of a few years. What you may have been paying as rent a year ago might not now if your landlord hikes the rent when it’s time to renew. Also, the landlord can decide to sell the property which means you will have to move.
#4: Tax Advantages
One benefit of buying a home is the tax advantage which allows a deduction of the mortgage interest expense. Tax laws allow those who itemize their taxes to write off their mortgage interest payment, that is, less is paid for your mortgage. There are no tax benefits for renting to you, only to the landlord.
When it comes to renting, the landlord can decide to increase the rental fee or sell the property which requires you moving out at the end of the lease. However, as a homeowner, you lock in your housing costs and this way, you can give your family & children stability of staying in the same school and community for an extended period.
The decision to either rent vs. buy is simple. Renting for short term is ideal, but if you have long-term plans then buying is the best decision for you and family. Most importantly, your decision could be based on making calculations to which option will cost you less, build wealth, and on what’s best for your family.
When working with clients, Karen makes it a priority to get to know them and connect with them to fully understand what their dreams are when it comes to finding a home. Her warmth and loyalty with he....
Latest Blog Posts
1. Locate a Lender that fits your financial needs.Majority of mortgage lenders typically have several different programs that work for every homebuyer’s financial situation. Take time to