Is renting vs buying causing you anxiety? Read this important guide now.
August 2, 2021
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Deciding whether to rent or to buy a home is a key question facing many singles and families, especially with job shakeups during the pandemic. Home loan interest rates have been at the lowest rates in decades over the past year, but many people also lost jobs or were forced to go from a two-income family to a one-income family because of child care issues with COVID-19-forced school closures. These factors definitely play a part in the decision of rent vs buy. So let’s take a look at the benefits of each option.
Benefits of Renting
No Maintenance Costs
When you rent a home, the landlord is responsible for all repairs and/or replacements on the property. If your hot water heater goes out? The landlord pays. If the roof starts leaking, the landlord pays someone to come out and repair it. Homes have a lot of pieces and parts to them and eventually they wear down or wear out. Sometimes it’s nice to just have to pick up the phone and have someone else handle the issue and the cost.
No Real Estate Taxes
One of the major benefits of renting versus owning is that renters don’t have to pay property taxes. Real estate taxes can be a hefty burden for homeowners and vary by county—in some areas the costs can be thousands of dollars annually.
Although property tax calculations can be complex, they are determined based on the estimated property value of the house and the amount of land. With newly built homes getting larger and larger, property taxes can be a significant financial burden.
No Down Payment
While renters commonly have to pay one month’s rent and a security deposit up-front, this usually isn’t anywhere near the dollar amount required to put down on a conventional mortgage, which usually equals 20% of the value of the home. Of course, that down payment results in having equity in the home, which only increases as the mortgage is gradually paid off. And once you own a home free and clear, you have a valuable investment that renters never attain.
Flexibility to Relocate
One of the key highlights to renting a property is the ability to relocate easier. If your job wants to move you across town, or even across the country, you can give a 30-day notice to your landlord that you’re going to have to break your lease, pack up and move. Sure you will likely have to pay penalties for breaking said lease, but you won’t have to worry about preparing a property for showings, or selling a home before you can have the money to purchase a new one.
Lower Insurance Costs
While homeowners need to maintain a homeowners’ insurance policy, the equivalent for renters is a renter’s insurance policy, which is much cheaper and covers nearly everything owned, including furniture, computers, and valuables. The average cost of renter’s insurance is $180 per year, while the average homeowners insurance policy costs $1,211 per year, according to a 2017 study by the Insurance Information Institute.
Availability of High-Cost Amenities
When you rent an apartment or condo, you can have access to expensive-to-purchase amenities such as a pool, exercise room, jacuzzi and sauna. These are included in the cost of your rent so not only do you not have to pay to put them in, you also don’t have to pay to clean or repair them.
When you rent a home, however, you face the possibility that your landlord could sell the property at any time, forcing you to have to relocate during an inopportune time for your family financially and resulting in a difficult time finding another appropriate rental in time. You also face the possibility of increasing rent costs over time for the same space. So let’s take a look at the benefits of purchasing your own home:
Benefits of Buying
Home Ownership is a Better Long-Term Investment
When you buy a home with a 30-year mortgage and make monthly payments, you will own a home to sell at the end. If you rent a property for 30 years, however, you won’t ever get any of your monthly rent payments back. It’s a monetary investment into your future and provides security for you and your family.
Interest Rates Are at Historic Lows
The argument for buying instead of renting only gets stronger with the low-interest rates that are currently available. What may seem like a slight difference in your mortgage rate can make a huge difference in your monthly payment. Interest rates are still competitively low. So, now is a great time to purchase a home and take advantage of low rates. Locking into a low 30-year mortgage rate today could save you hundreds of dollars each month for decades to come. When comparing the benefits of owning vs. renting, you will find that many of the current rental rates are higher than a mortgage payment!
Down Payments Can Be as Small as $0
Depending on your situation, you could end up needing NO down payment dollars. If you qualify for a VA loan or USDA loan, this could definitely be the case! This doesn’t necessarily include closing costs, but don’t be afraid to reach out to lenders to see if you qualify for these government programs and start the home-buying process.
Gift Money Can Be Used as a Down Payment
Believe it or not — using gift money for down payment is allowed. The amount you’re eligible to receive depends on your loan program. There’s a good chance you may have to come up with your own money to help cover the cost of down payment, but it’s a heck of a lot less than you’d need to come up with on your own.
You Gain Equity As Property Gains Value
Home values are expected to continue rising, making home ownership a profitable long-term investment. U.S. home prices rose more than 3% in 2019 through October. Why does this matter? Because increasing property values mean that the money you spend on your home will provide significant returns in the long run. And, every time you make a mortgage payment, a portion of that payment pays your loan down each month, giving you more equity in the home.
Long-Term Predictable Monthly Payments
Tired of your rent rising? Sick of it causing your budget to change? When owning a home and using a fixed-rate mortgage, that can never happen. You’ll always pay the same amount each month, each year. Plus, there’s no risk of a landlord trying to kick you out because he wants to sell the home.
Enjoy short-term savings via annual tax write-offs and mortgage interest payment deductions, along with other deductions depending on each individual’s situation. These deductions often amount to significant savings, and are not available to renters.
Ability to Customize the Property
We’ve all been there…you want to hang a picture on your wall…but the lease says you can’t drill holes in your walls. Or…you want to paint your living room a different color…but the lease says no painting the walls. When you own your own home, you are free to customize it to your liking and make it feel like “home.”
If, after taking a look at all of these factors, you decide to look into purchasing a home…please reach out to the team at Varma Realty Group. We are happy to answer any questions and can even help connect you with lenders to get started on the loan pre-qualifying process! You can reach us at email@example.com.
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