Assuming that most Americans can’t afford to purchase their home with cash, a mortgage is a necessity. Whatever type of mortgage you have, you’re paying interest, and because you own real estate, you’re paying property taxes. Both mortgage interest and property taxes are deductible. The higher your effective tax bracket, the more these deductions matter. But if your income crosses over a certain threshold the tax deduction begins to phase out and ultimately could be eliminated. There are also tax deductions on certain closing costs that can also mitigate the front-end cost of buying a home. Home ownership also means you’ll be paying for home maintenance. However, you can purchase a home with a home warrantee to alleviate some of the maintenance costs. Some capital improvements around the house can increase your cost basis. That being said, not everyone can benefit from it. After the housing debacle in 2008, home appreciation has picked up again. But, banking on residential appreciation is no longer a given. This is where the argument comes into play. If you’re a senior and buying your last home, residential appreciation is an issue for your heirs, but not necessarily for you. If you’re a first time buyer and have scraped together enough money for a down payment, you have cause to pause.
Sometimes renting is all one can do. So, if you’re wondering what you should do, consider consulting with a qualified mortgage professional. They will help you understand where you stand, how much time you have before you can qualify for a mortgage and what steps that you should be taking now so that the time to buy is sooner rather than later. It costs nothing to check. A good realtor will have a lender referral if you’re not sure where to start.
There are many reasons people are choosing to rent rather than own. They include not having a down payment or enough income to support a mortgage, as well as uncertain job security. Many Millennials have significant student loans that can disqualify them from a mortgage. There are intangible reasons as well, with one of the biggest intangibles being freedom of movement. When the lease is up, renters are free to go or re-sign a new rental agreement. Additionally, many leasing scenarios allow sublease agreements that can provide significant flexibility for a change of venue. In general terms, you have no inside maintenance or outside landscaping obligations. Renting instead of owning also has its downfalls. For instance, as a renter, you are subject to rent increases. Additionally, landlords may limit personal touches around the house or apartment to neutral colors and allow few construction alterations. If you are a renter, you may need to be mindful of your musical tastes and the volume at which you listen to it, as your neighbors may not share your musical appreciation.
To help decide if you should rent or own, consult with a financial expert or real estate expert. They can shine some light on different aspects of the market you may not have considered.
1 U.S. Census Bureau News, Residential Vacancies and Homeownership in the Third Quarter 2014, October 28, 2014.