renting

The common wisdom is that buying a home is better than renting. Common wisdom exists for a reason, buying is better than renting and here’s why.

The first reason is cost

If you rent a home it costs you more in 5 years than buying one does. Here’s how. If you rent a home for $1,500.00 per month for 5 years will cost you $90,000.00. Buying a home with a mortgage payment (principal and interest only) of $1,500.00 is $90,000.00… BUT a homeowner gets a tax deduction for the interest paid on their mortgage. Let’s say that deduction is a total of $3,000.00 or $250.00 a month. Over 5 years that’s $15,000.00. Deduct that from your 5 year amount paid out and you actually only paid $75,000.00! That doesn’t even take into account a First Time Home Buyer tax credit that you may qualify for if you’re a first time owner.

Finite vs infinite

Those monthly payments are finite with a purchased home, but infinite when you rent. Your mortgage has a beginning payment and end payment and once you pay that last payment, you get to live in your home with no monthly payment to stay there (beyond your real estate taxes). When you rent, you pay a monthly payment to live in the home with no end unless you leave. If you rent a home and walk away from it when the lease is over you leave with nothing but the possessions you came with. When you sell a home, you get back the equity, or value, that you put into the home. As you pay your mortgage, you gain equity from the amount of principal paid. You also gain equity when the value of your home rises. For instance, if you purchased your home for $150,000.00 and sell it ten years later for $250,000.00, you gained $100,000.00 in equity.

Repairs and updates

That rise in equity can come from changes in the market, but also in the value of repairs and updates you make to the home. Those repairs and updates can be made when you want and no one else gets a say. If you rent and want to update even the paint in a room, you need the permission of the landlord and if they say no, you’re stuck.

So yes, it pays to buy!

If you are thinking of buying a home in the Tampa Bay area, give The Deb Ward Team a call! 727-410-0336

Should I be buying a home or renting? Many people ask themselves this question everyday. For some, it depends on their lifestyle, but generally, for many buying a home becomes the better answer to the question. In order to help you figure out that answer for yourself, let’s look at this is from why people do each: buying a home and renting.

Renting: Do you know you will have the same job over the next few years? Are you planning on staying in the area or moving? Can you find somewhere to rent that is less expensive than a mortgage payment? Do you prefer to let someone else do maintenance on your living space and have to wait for that maintenance appointment to be made by another person? Renting can be a plus. Generally there are lower up-front costs and more flexibility to move if necessary. The problem with renting, though, is you have no control over rent increases, your living space style, and you aren’t building any equity in the real estate property for you, and the landlord makes the rules.

Buying: Are you planning on staying in the area you live in for more than a few years? Do you want to build a real estate investment? Do you want to be in control of your living space – changing paint or even where walls are, planning maintenance appointments on your schedule? Do you need tax deductions? When you buy, you own the property and all the equity it has. That means you can borrow against that equity to improve the property. It’s yours so you can make any changes to it that appeal to your own personal sense of style. Ownership also gives you tax deductions against your income tax burden for both mortgage interest and your real estate taxes. That is a huge savings. Although the economy is taking a long time to improve, in some areas real estate is again gaining value instead of losing value.

You have to make the decision for yourself, but in the long run, buying a home is much better than renting a home.