When does Buying a home top Renting?

Every month when that rent payment is due it can feel like you are just throwing money down the drain. This can get pretty discouraging after a while, it is important to know when buying a home tops renting. Let’s discuss a few times it would be better to buy than rent:

1. If you value owning assets. Every payment that you make on a mortgage increases your equity in your home and moves you closer to owning it outright. Homes can also appreciate in value, increasing your equity automatically. If you are looking for a way to invest your money even as you spend it on housing, buying can be a good move. Especially now with the mortgage rates being as low as they are.
2. How long do you plan to stay? This is a very important thing to consider when deciding to buy over rent. Do you love where you are at? Or have you always been dreaming of living somewhere else you are just waiting on the right time. If you can see yourself living in the same place for more than 9-10 years, then buying would be the best option because the initial fees can be spread out over a longer period of time.
3. You have the money. Buying a home is a financial commitment, so you have to be prepared for that. When buying a home, you will need enough money upfront for a down payment, as well as to cover closing fees. A healthy place to start is 20% of the home’s value, but you may need a minimum of at least 3% to 5%. On a $200,000 home, a 20% payment is $40,000, while 5% is $10,000. An addition, you have to factor in transaction costs, which can be between 3-6% of the price.
4. You could benefit from the tax break. One benefit that comes with home ownership is the tax deduction you can get for the mortgage interest. Let’s crunch numbers, on a 30-year loan for $200,000 at 5% interest, for example, that amounts to nearly $10,000 in the first year. Interest costs can reduce your taxable income as long as you itemize your deductions. After putting enough down, you may also be able to tap into the equity you hold to borrow for other major expenses such as home improvements or college tuition, using a home equity loan or line of credit. Your equity is the market value or your property minus what you owe on it.

It is important to pay attention to the market also when considering buying or renting.  If buying is the right decision for you, we want to help! Contact us here.