When you weigh the pros and cons of renting versus owning a home, you will find advantages for buying winning. The first thing is that you need to determine how much of a house you can afford, which would mean taking a good look at your income, savings, and monthly expenses. Then of course, you would need a down payment but with so many excellent programs on the market, you can be sure there is something for you.
For savings, often you will discover that the amount of your monthly rent is the same or even less than what you could secure a mortgage for but in addition, you get a huge tax benefit, which means the overall savings is much greater. Now, let us say that you had a monthly rent payment of $800, which would increase about 5% yearly. You could purchase an $110,000 home, which would give you an average payment of $1,000. With this scenario, after a six-year period, the amount of your mortgage would now be less than the amount of your rent, not to include the tax savings.
Another consideration associated with your rent is that the money you pay to the apartment complex or property owner is used to cover specific home expenses.
Obviously, when you buy a house, you now take on the responsibility for these same expenses but now for your home. Then, you would have additional expenses to include insurance, utilities, property taxes, maintenance, and if you live in a neighborhood that is a part of a homeowner’s association, associated fees.
Owning a home does mean expenses and in some cases, those can be high. However,
you need to determine if you are willing to keep paying rent to someone else so they can benefit from the tax breaks and growing equity or if you want to invest that money for yourself. Remember, you do not have to purchase an expensive house for your first home. For instance, if there are just the two of you, you might consider a smaller, two-bedroom home. Then after living there for several years, you should have enough equity, allowing you to move up to something larger.
When trying to determine if you should buy versus rent, you need to analyze three things – relative cash flow, length of term, and rate of appreciation. With this, you will be able to determine the current value of money you would pay in rent versus the term of the home. Keep in mind that the appreciation rate or future value of the home should be a huge consideration. With this equity, you could have a nice savings or nest egg on which to retire or purchase a different home.