According to the National Association of Realtors, the average first time home buyer is 31 years old. This means that a large majority of younger people are choosing to rent or staying at home longer. When deciding if it is the right time for you to buy, you will hear a lot of differing opinions on the subject and it can be difficult to weed out the facts from fiction. There are some important factors to consider when deciding whether home ownership or renting makes more sense for you. Here are the facts:
Reasons To Buy
- Build Equity: Equity is the difference between a home’s fair market value and the balance left on the mortgage. It is your share of the value of your home. So with each monthly payment you make, you increase your equity. Equity is an important asset to have and can be used for things such as funding retirement or to obtain a loan.
- Tax Deductions: You are able to deduct mortgage interest and also property taxes. There are also tax breaks for first time homeowners that can take care of many of the expenses that come with a new home. Renters do not have this option. In addition, there are tax benefits when selling a home as well.
- Buying is Cheaper Than Renting: Nationally, the average cost of home ownership, which includes your mortgage, insurance, taxes and maintenance, is 38% less than the cost of renting. When you are paying rent, you are essentially paying your landlord’s mortgage and home expenses, plus extra so he can make a profit.
Reasons To Rent
- Bad Credit: If you have a low credit score or have little to no credit established, it will be difficult or impossible to get approved for a mortgage loan. And if you are able to get approved, it probably won’t be for the amount you were hoping for.
- Low Income: If you expect a pay cut or an increase of income in the near future, it may greatly impact what monthly mortgage amount you can afford or change the amount you get approved for. Holding off on buying until you have a higher income is a smart move.
- Career Uncertainty: If you are expecting a career change in the near future this will affect your ability to buy. If you think you will be working in a different area, you may want to wait to buy until you know where exactly you will be working. Switching careers because of a higher income will help you get approved for a higher mortgage, and it would be in your best interest to wait to buy.
Whether renting or buying is more cost effective is different for each person. It is not a decision that should be made lightly and all factors should be equally weighed. It is always helpful to speak to a licensed Realtor or a Loan Officer to decide which option is best for you. The REALTEAM is always available to answer any questions and help you find your next home.