Buying vs Renting

Advantages to Buying a Home

There are different advantages and disadvantages for both renting and buying a home. What’s best for you depends on your personal and financial situation. Before buying a home, it’s important to understand the benefits and costs to such an important transaction.  Buying a home can enable the homeowner to build equity which is one of the main reasons they jump into the housing market.  However, the level of equity they build may be affected by the real estate market and economy.  Check out this episode of The Housing Hour, to get more in depth information and expert advice about mortgage lending.

Benefits to Owning a Home

• Tax Breaks. Owning a home can offer income tax benefits. Federal and state income taxes you pay when owning a home are fully deductible on your tax return. You can deduct your property taxes as well as mortgage interest.  If you choose to sell your home, the IRS will not apply a “capital gains” tax on the profits of the sale of your home if you meet certain requirements.  You may keep the first $250,000 of profit if you are single and the first $500,000 of profit if married.  Also, if you work from home and have a home office, you may be eligible to take deductions as well.
• Build Equity. Owning a home is a great way to build equity while you pay off the principal. Homes are regarded as safe investments when home values rise and your debt drops. According to NAR (National Association of Realtors), the national median home price has risen every year since 1968. Usually, the value of a home will appreciate along with the rate of inflation, with a couple of extra percentage points. If you intend to stay in your home for at least five to seven years, the cost of purchasing the home is usually offset by accrued equity and increased housing value. If the equity of your home increases 20 – 80 percent loan-to-value, you may borrow against the equity to pay off major purchases such as a second home, medical expenses, your child’s education, or an emergency. Also, another benefit includes that if interest rates drop, you may take advantage of lower rates if you choose to refinance.
• Freedom. If you own your home, you can choose how to make changes such as paint color, possible remodels, adding new features, or how to maintain the home. This can add financial freedom as well knowing you may have equity building with every passing year.

Many people may choose to rent because they don’t understand all the benefits of owning a home. In 2015, federal loan programs have made some dramatic changes making home ownership easier and more affordable than ever. There are various federal loan programs from state to state for potential home buyers, including USDA Rural Housing Loans and THDA loans. Why rent when you can make comparable payments on a home of your own? Read on to discover why many Americans are buying homes at an increasing rate.

• Increase Borrowing Power. For owners who decide to stay in their home for a long time, the equity built up on a home can be useful for many things. You can use it to secure a line of credit, which means you have more power to invest how you see fit. This means you have more cash available for big purchase or emergencies.
• Stability. If you get a home with a fixed rate mortgage, you can have the same payment amount for 30 years. Adjustable rate mortgages have a cap, so homeowners with these types of mortgages can figure out their maximum payment in advance. Owning a home also gives you more pull in your local community, since you’ll be a fixture in your neighborhood.
• More Control. You have more freedom to do as you wish with your home when you own it. You can enjoy the power to change anything you want without having to haggle with the landlord. Grow a beautiful garden or make any other permanent changes that you’d like while adding to your own investment. Visit The Housing Hour to get more tips and info on home ownership.