With low interest rates, lots of inventory, and low prices, many renters are considering whether it might just be time to buy a home. Tools like the Buy vs. Rent Calculator can help you weigh all the factors.
Buying a home is one of the biggest investments you will ever make. If you have good credit, a stable job, and savings in the bank, then buying a home may be a wise financial decision for you that could end up saving you thousands of dollars over time.
By most estimates, buying verses renting can save you a good $10,000 in just the first six years. Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your house where renters do not. Yet, renters have greater flexibility to move as they don’t have to worry about finding new tenants.
Aside from building equity, there are many other advantages of home ownership to consider. In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. Yet, with the tax benefit for homeowners, the savings can be significant.
Your rental company takes part of your rent payment to cover certain housing expenses. When you decide to purchase a home, you accept responsibility for paying for these expenses. They are additional costs to your monthly mortgage payment. While owning a home means you will have to pay real estate taxes and other costs like insurance, maintenance, possible HOA fees, and all utilites, owning a home can still bring big savings at the end of every year. Mortgage interest payments and property tax payments can be deducted from your taxes.
The tax benefits of owning a home can add up to substantial savings over the life of the loan. Renters have neither these costs, nor tax advantages. In fact, with the tax savings of homeownership, the homeowner’s payment is less than the rental payment after 3 years. Consider the comparison below:
- The renter starts out paying $800 per month with annual increases of 5%
- The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000
- After 6 years, the homeowner’s payment is lower than the renter’s monthly payment
There are many factors to weigh when making the decision to buy or to rent. For more information on comparing the costs of renting versus buying, visit http://www.petersenpartners.com/buy_vs_rent.aspx. You can view the advantages of buying in the Buy vs. Rent Comparison Chart, or view a financial comparison of buying versus renting in the Buy vs. Rent Calculator.
When you decide it’s time to buy a home, you’ll need to determine how much home you can afford. Your income, savings, and monthly expenses play an important role in determining how large a mortgage you can afford. To figure out the amount you can afford, check out Your Path to Homeownership and click the link for “Affordability”.
When you are ready to buy a home, be sure to consult an experienced real estate professional. An experienced agent acts as your advocate. A REALTOR’s job is to negotiate the best deal for you as well as provide invaluable assistance in the buying process. When you are ready to buy, be sure to visit www.PetersenPartners.com.