Buying vs. Renting

Should you stop renting and buy a home?

If you’re ready for the commitment, you bet!

Yes. Buying a home is a big decision. A big commitment, too. But if you think it through, clearly understand your financial situation, and you’re ready for the short- and long-term responsibilities, it can be one of the most rewarding decisions you’ll ever make.

Why buying a home is a good idea.

Build equity:
Every monthly mortgage payment you make is part interest and part principal. The principal is what you owe on the loan and it goes directly towards your home’s equity. It’s like investing in yourself. Which is a lot better than 100% of your rent payment going to the landlord. Plus, whenever home values increase (and historically they do) so does the value of your home.

Tax advantages:
The interest portion of your monthly payment is like any other interest. It’s the fee you pay for borrowing the money. However, the great thing about mortgage interest is it’s tax deductible. And so are your property taxes.*

Loan options:
There are different types of loans to choose from. So depending on your financial situation, and long and short term plans, you can apply for a mortgage that will fit your needs.

Live your way:
Do you feel comfortable in a sparse, minimalistic space design? Or do you like different colored walls and pictures everywhere? As a homeowner, you’re free to live, decorate and change your home however you want.

What the experts say.

Many experts believe it makes good financial sense to buy your home rather than rent. In 2012, the National Association of REALTORS® predicted that rents for apartments would increase for the fourth year in a row nationally – by 4.6% in 2013 – and rents will continue to increase by 4% each year in 2014 and 2015.

The average nationwide monthly apartment rent was $1,048 in the fourth quarter of 2012, according to real-estate research firm Reis Inc. A monthly payment on a $125,000 mortgage can be as little as $633.36* (Including principal and interest only. Property taxes and mortgage insurance are not included).

If the average national interest rate hovered around 4.5% (they’re much lower today), homeownership may well be a better investment of your money, especially if you plan to stay in the home for at least five years. Experts estimate that buying will be cheaper than renting until the 30-year fixed rate reaches 10.5%, more than double what it is currently!

Important homeowner costs to consider.

Down payment:
Different loans require different amounts.

Insurance:
Property insurance is required. Flood or other types of coverage may also be required.

Property taxes:
Varies widely. Determined by local city or county government.

Maintenance and home improvement:
From a leaky faucet to new paint, you don’t have to fix everything yourself, but paying for and getting it done is your responsibility.

Reasons to keep renting for now.

Sometimes, due to your personal situation and long term plans, renting is currently a better option.

  • You anticipate a change in employment or income in the near future.
  • You’re not comfortable making a long-term commitment to a particular location or area.
  • You need to build a stronger credit history.
  • You’re not prepared to handle responsibilities like leaky faucets, paint and other routine maintenance.
  • You’re not financially ready to cover monthly and yearly costs for utilities, insurance and taxes.

*Everyone’s tax situation is different. Please consult a professional tax advisor.
** This summary is based on a $125,000 loan amount, loan term of 360 months and an interest rate of 4.5%.

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