Should You Rent or Buy a Home?
The advantages of buying a home compared to renting a home are abundant. Owning a house, as opposed to renting, is not only benefiting financially, but it also gives you a place to really call home. Obviously, it presents you with the responsibility to maintain your own property, but it also gives you the freedom to do as you wish with the property.
In most cases, the money a landlord spends on rent can differentiate depending upon the amount a homeowner spends on a mortgage. However these elements seem incomparable when you consider tax deductions, the many benefits you receive when owning your own home and the real savings offered. A monthly mortgage payment in many cases is fixed during the life of the loan, while your monthly rent may increase at your landlords will or at minimum along with inflation.
New home buyers should also consider appreciation (the dollar value increases your home value over time). Over the life of your home ownership, your new home may appreciate tens of thousands of dollars which will eventually become yours when you sell it! Landlords take a percentage of your monthly rent payment to pay for their own mortgage along with the other expenses that they incur while maintaining the rental. Don’t forget they rent the property in order to make a profit, including eventual property appreciation they will gain when they resell the home or apartment.
If you purchase a home you pay the expenses incurred to maintain your home, and also gain the in tax savings and property appreciation. Whether to rent or to buy a home is a difficult question. The rewards are more beneficial if you are ready to own your own home.
The Internal Revenue Service allows home owners to deduct mortgage interests, property taxes and some of the other expenses incurred in owning your home when filling out their annual tax returns. Home owners also have a tax benefit when they sell their homes: the current tax law allows, in certain cases, the exclusion from taxable income of up to $250,000/person in capital gained from the sale or exchange of the property used as a primary residence.
If you currently own a home you should consider selling it first. When you get to the negotiating table for your new home you will be in a stronger position if the new purchase is not contingent on the sale of your current home. Relocating your residency may become stressful, and in order to avoid the pressure and the rush of having to purchase a home you may want to consider renting for a short period of time.
Know where your down payment will be coming from. Savings account, sale of current home, or a gift as a source of payment. Don’t forget that conventional lenders will only allow you to use 5% of the down payment from a gift. Lenders verify the aging of your deposits to insure that your down payment is not composed of more than 5% gift funding.
Finally, consider getting yourself pre-approved for a mortgage. Most home sellers will take an offer more seriously if they know you have already been pre-approved for a mortgage. In fact many Realtors won’t begin to show you homes until you have a pre-qualification letter from a lender.