Couple buying a homeWhether you own the place or just rent it, a home is still a home. People have different reasons why they purchase a home but one of the major reasons for buying is to build equity. Real estate is shaping up to be one of the best ways to earn huge financial gains.

Of course, we cannot overlook the financial crisis of 2008 when the U.S. housing market experienced losses on a massive scale.These days, buying a homerequires careful consideration of the costs and benefits. For starters, you should never purchase property during a time when market prices are sky-high.

Despite the risks, a lot of prospective buyers opt to have their own residential space despite the strains of the housing crisis. It’s probably due to the sense of freedom they get from owning a home – making home improvements they deem suitable, and even saying goodbye to landlords who could exercise their power to increase rental costs or evict you from the house.

Here lies the question now: Should you rent a home or buy one? To answer this age-old question, you need to look into your current location, living space preferences such as size and design, among others. Take a look at these factors to help you decide whether you would rather be a homeowner or a home renter.

You should rent if:

  • You want to be more flexible. Renting a home enables you to explore neighborhoods and discover which kind of situation you want to live in. The time that you spend renting a houseshould be used to open yourself to possible living arrangements and be exposed to the pros and cons of the area, should you decide to settle.
  • Your income is unstable. The stability of your source of income should be a determining factor whether you can afford to pay for mortgage. A pay cut will likely lessen your borrowing capability.
  • Your work requires you to be mobile. If your job demands that you be in different places frequently, renting your place is the wiser thing to do. In addition, if you intend to quit your present job, buying a house might turn into a liability.
  • You incur bad debt. Having a poor credit record will make it difficult for you to get approved for any kind of loan, much more a housing loan. It is important to establish a good history of on-time payments to get the right reputation needed to qualify for a mortgage.
  • You don’t want to spend on home repairs. Renting exempts you of financially pressing issues like a broken pipe or a leaking roof. Your landlord takes care of these concerns for you.
  • You don’t want to fuss about the small details. More often than not, a landlord’s obligation includes paying for various utilities and services such as garbage collection, water supply, building maintenance, and some heating facilities.

These advantages may seem like renting is the better option, but hold your horses! The biggest drawback is that you don’t have control over rental expenditure. Rent rates may fluctuate at the luxury of the landlord, making it difficult for you to have a fixed budget.

You should buy a home if:

  • You want your money well spent. Despite the financial crisis in the past, real estate continues to be one of the best investment options. Paying for your own home is like having forced savings that will eventually increase your asset value. As a general rule, if you have a minimum stay of five to seven years in your property, the actual price of the home is likely to be equal to the agreed equity, thus increasing the value of the house. In the event where your loan-to-value ratio exceeds 20-to-80, you have the option to borrow against your equity, which you can use to pay for other major expenses. Once mortgage is paid off, the equity can also be borrowed to finance home improvement projects to support your child’s schooling. In contrast, when you are renting a home, your financial asset does not increase. It’s the landlord’s equity that you are enriching.
  • You want to enjoy tax deductions. As a homeowner, you are apparently entitled to have your mortgage expense deducted from your gross income to adjust the amount of income subject to tax. Renters don’t receive this privilege. In addition, if you intend to sell your property and you meet certain criteria, the IRS won’t slap a “capital gains” tax against your profit from selling your home in the future.
  • You are a home improvement lover. You are in control here! No one will hinder you from doing home improvements like putting on a new coat of paint or hanging frames on your walls. You can even extend your house from end to end or tear one wall down, and no one will complain because the property is yours.
  • You want to choose the way you do home maintenance. All maintenance options are open depending on your budget and the type of homethat you have. You can either hire a contractor of your choice,pay a homeowners’ monthly fee to have maintenance work covered by the association’s contractors, or do the repairs yourself.

Indeed, buying a home can be a very good investment but financial advisors discourage acquisition just for this reason. Statistics show that housing prices can decline anytime. Purchasing a home is a good choice if you intend to live in it but when it comes to having it as an investment you better hold your reins. The real estate market is still unstable since the U.S. economic crisis as compared to the high demand seen between 1998 and 2008 when the economy was at its peak. Even experts are very conservative with their opinions on real estate investments knowing there will always be a threat of decline due to fluctuations in the global economy.

So which should you choose?

Although many people say that renting is cheaper, others beg to differ, saying that buying a house is a wise purchase in the long run. It really depends on your preferred living situation and your interest to do maintenance and structural modifications by yourself.

If you choose to purchase your own home, try this neat trick to help you save more: Research for possible tax breaks when you decide to buy. Check your tax bracket because your 1040 tax deductions could very well pay for your home purchase expenses. You may also want to claim tax deductions during the first few years of owning the house, at the period when interest payments are at their highest within the mortgage amortization schedule.

Are you ready to buy? Do you have more questions?

I’d love to assist you on your next home purchase!

Contact Me