As a renter, it can be tiresome putting your hard-earned money into your landlord’s pockets each month, but it beats paying thousands on a new home each month, right? At first glance, renting may seem to be the smartest and least expensive option compared to buying, but if you’re planning on staying in the same location for seven to eight years, buying a home may be the optimal choice because of the potentially larger long-term payoffs. Knowing when and if to buy a home can be a difficult decision and one that should take serious consideration. We’ve put together the top five reasons to buy versus rent to help you decide what is best for you.
Perhaps one of the greatest benefits of homeownership is the many tax advantages associated with it. One of the main tax benefits is that owners do not pay taxes on the imputed rental income from their own homes, so they don’t have to count the rental value of their homes as taxable income. In comparison, landlords are required to count rent as income and renters do not have the opportunity to deduct the rent they pay. Homeowners may also deduct mortgage interest, property tax payments, and the capital gain they realize from selling their home, up to a limit.
In addition to all these deductions, the Madison, WI, housing market is healthy with several homes currently available on the market for $200,000 or less. With interest rates for a 30-year mortgage hovering around 4 percent, the average monthly mortgage payment for such a home would be $1,200, which is comparable to a middle-of-the-road 2-bedroom apartment in the area. And if you’re looking for a condo, you might even be able to save on your monthly housing cost while still having more bedrooms or greater square-footage.
One of the great benefits of being a homeowner is having the opportunity to customize, remodel, and renovate as you wish. And the greatest part: you don’t have to ask your landlord’s permission. You are free to customize your home inside and out, including landscaping, kitchen remodeling, replacing carpet with wood, installing a chandelier in the main entrance, or simply painting walls. Also, any change you make to the house has the potential to add value to the home later in life.
As a renter, your customization options are fairly limited. Typically, you’re able to make temporary changes, such as replacing knobs and handles, adding shelving to cabinets, or changing light fixtures; however, these changes will likely need to be reversed once you move.
If you choose to finance your home with a fixed-rate mortgage you will benefit from budget stability because the interest rate remains the same for the entire term of the loan. As a homeowner, you’ll have greater flexibility in deciding how much you pay each month by choosing a shorter or longer loan term whether it’s a 10, 15, 20, 25 or 30-year term. Plus, when the mortgage is paid off, the house is yours to keep.
As a renter, you don’t have the same flexibility and stability when making payments each month to your landlord. Unless you’re living in a rent-controlled apartment, landlords have the ability to raise rent year after year, increasing your risk for instability in an unknown future.
Buying a home during a cycle where home values are on the rise means you not only gain equity on your home when you make your mortgage payment every month, but your equity also rises with the value of your home. Later down the road, you’ll have the ability to take income or lump-sum withdrawals out of your equity to help pay for a number of things, such as buying a second home, starting a college fund, or saving for retirement. As a renter, you won’t see these gains because your landlord reaps the benefits of building equity.
Owning a home has been engrained in the concept of the American Dream for decades. It is sometimes seen as a symbol of success and accomplishment for homeowners and can build social status. Homeowners also have the opportunity to settle in and create a community, and a home may provide a larger space to raise a family or become an asset to pass on to children in the future. Renters aren’t able to gain these benefits because their living situation is seen as temporary.
Are you thinking about making the switch from renting to buying? Contact us to learn more about the benefits of homeownership and how we can help you get into a new home this year.
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