Buying a Home is the American Dream. It's more than a place you put yours at the end of the day. It defines you, protects you, and prospects with you. Yes, Home Ownership is a noble pursuit, but it always starts with this first, important question: Should I buy or rent my home? The answer, surprisingly, is not so obvious.
Now the question of "affordability" is an important one, but that's not the subject of this article. We have a free calculator at our website. You're welcome to use it. Before the subject of this article, however, deals with the questions that must be answered, before becoming a migrant into the magical realms of HOME OWNERSHIP.
Here are 5 MAGIC POINTS that you need to test, whether or not to BUY or RENT your next Home:
- MONTHLY PAYMENTS
- TAX RETURNS
Renting a home requires that you give a check to the landlord every month. That's it. You're done. Everything else is just taken care of for you. When you OWN a home, you are in business for yourself, and that means you must handle all of the expenses yourself.
- You are responsible for the monthly mortgage payment for the bank …
- You must pay all your utilities, including phone, gas, electric, cable, trash, water, etc.
- Do not forget your responsibility to take care of maintenance. Not having enough money in the bank account is not a good enough excuse. If it's broken, ya gotta fix it!
- Dues, your Membership Fees, Property Taxes, Special Assessment taxes, insurance … yada, yada, yada.
When you rent a home, you give the landlord a check.
Renting and Buying have different financial commitments.
- To rent a home usually requires a lease. Sometimes it's month to month; sometimes it's a 12 month lease. But, no matter what, there's always a way out. Your commitment is limited to the time you choose to stay and stay there.
- When you buy a home, you usually sign a 30 year mortgage, which would like to ask, is like forever. Every single month, on time, you are committed to making the payment. They do not care if you want to move at some point. You can sell your home of course, but you can not break your mortgage, like you can break your lease.
Buying a home requires a long-term, financial commitment. Renting a home simply requires you to make a check at the home of choice.
3. MONTHLY PAYMENTS:
It seems like this one wants to pay less each month on monthly payments. Let me shed some light on this subject. Examined closely, this is as far as the moon. Let's use an example:
- As a renter, you pay $ 800 a month, let's say that increases 5% each year. The math may differ with you and your landlord, but you get the idea. Barring rent-control, this is inevitable. Simple enough.
- As a homeowner on a fixed rate loan at $ 1000 Principal and Interest per month, the payment never changes … Never … Not ever …
- In other words, the Renter's monthly rent will actually SURPASS the homeowner's mortgage payment … Much faster then you might expect.
In this example, our Renter's Monthly Payments will exceed our Homeowners Mortgage Payment, in about 6 years.
4. TAX RETURNS:
Usually receives a tax benefit from the State and Federal Tax Boards each year, sometimes referred to as a "renter's credit". But the homeowner receives a deduction on the interest paid on their loan. This is a huge benefit to the homeowner.
- Let's use the same example with our $ 800 renter. At the end of the year, our pensioners receive a $ 600 pensioner's credit on their 1040EZ form when they pay their taxes. Simple enough.
- Our homeowner, on the other hand, paid a total of $ 12,000 in mortgage payments, of which about $ 11,500 went to INTEREST. This INTEREST is a write-off.
- Let's see … $ 600 versus $ 11,500. Hmmm. I like that math. That equates to a nice healthy return for most of us, come April of next year.
Jamaica! Take those thousands of dollars in tax return and go on a cruise!
It's arguably much, much harder for a renter to build wealth. There is no built-in mechanism for appreciation, whereas the homeowner has been postured herself wisely for the future.
- Let's say we have a renter that wants to get wealthy. Great! Cattle Futures from August to September (Cattle Futures from August to September ( just an example, folks … I do not know anything about cattle …). In any event, most people would have to be that our renter is following the proverbial "pipe dream" towards wealth.
- But let's say we have a homeowner who wants to build wealth. Great! What do they need to do? Simple …. Nothing … Pay the mortgage … Live in the house … Go work your job. That's it. Real estate appreciates in value, on average, over the long haul, like no other financial vehicle. It is a virtual certificate, and it is automatic. The homeowner controls the total value of the home. That's the magic of leverage.
- Let's drive the point home: Someone might buy a house at $ 150,000, let's say, and over the course of 7 to 10 years, it was completely reasonable to suggest that this same house could be worth around $ 600,000.
Renters do not have a built in benefit for building wealth, whereas real estate appreciates in value as a virtual certainty. They do not call home-ownership the "American Dream" for nothing!
The subject of deciding on whether to buy or rent, is not simple. In the end, it boils down to a question of complexity. Being a renter is simple. Being a homeowner is more complex, and yet, that does not mean that it is not within your grasp. It is !!! There are so many people that are just waiting in the wings, yearning to help you get there. Real Estate Agents, Mortgage Brokers, Friends, Family, etc.
With all of these resources around you, just about anyone can own a home, and in this great country, the American Dream of Home Ownership is completely within all of our grasps!
But do me a favor. Give yourself the time to examine these questions. Look within. As we all get older, we warn for more. Buying versus Renting is a common theme in this journey. As we wave goodbye to the younger years, we say so long for the simplicity of life, and we say Hello to the promise of prosperity, wealth, and a better tomorrow. So say hello to higher, more complex things. Often times, it's simply the willingness to accept the complexity that you want.
Best of luck on your journey, from Renting to Owning your next Home!
We've been providing this information to you, and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust, and never return to your own common sense.
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Source by Tom Levine