In a
real estate market where home prices are rising, many have begun to re-examine
the idea of buying a home, choosing instead, to rent for a while. But often,
there is a dilemma: should you keep paying rent, knowing that rent is rising
too, or should you lock in your housing cost and buy a home?
Renting
With
the housing market crash in 2008, many homeowners lost their homes and became
renters. According to Iproperty
Management, “the number of households renting their home …
rose from 31.2% of households in 2006 to 36.6% in 2016”.
Some
choose to rent because it is more convenient for their lifestyle. Those whose job
requires frequent moves need the flexibility that a 6-12 month lease agreement
gives them so they can move to their next assignment!
Many
renters believe that renting is cheaper because they do not have to pay for
maintenance and repairs. (Not true! Landlords work those expenses into
your rent and other fees). Another reason many rent is that they feel like
they cannot afford the down payment and closing costs required to buy a house,
due to their inability to save much after paying their monthly expenses.
That
can be true! Nearly 1 in 4
renters spend at least half their household income on rent. In
2017 the “severely” burdened renters’ rate was 24.7% with 24.9%
reporting they were “moderately” burdened.
Renting
also brings some financial disadvantages. Homeowners can take advantage of tax
deductions that let them claim their property taxes and mortgage interest.
Additionally, there is a big risk that your rent will go up every time you
renew your lease, as we know the median asking rent has been increased steadily
since 1988!
One
of the major challenges with renting is that you don’t have a space to call
your own. When you rent, you are paying your landlord’s mortgage, and therefore
they are the beneficiaries of the equity gained from paying that
mortgage.
Homeownership
Let’s
focus on the one big difference between renting and owning, the ability to
lock in your housing cost!
Assuming
you will have a fixed-rate mortgage, your costs are predictable! You will know
exactly what your mortgage payment will be for the next 15-30 years. The
homeownership rate in 2018 was 64.4%,
and has been on the rise. Those households locked in their housing cost rather
than wait for their landlord to raise their rent again!
What
are the disadvantages of owning a home? Well, it is a long-term financial
commitment! It is not easy to pack quickly and move. You will need time and
good planning to do it in a short amount of time.
You
need to save your money! Getting a mortgage requires a down payment, closing costs,
and moving expenses. Again, that will require some savings and
planning!
Unless
you have a homeowner’s association (HOA) (and you pay an HOA fee) or a
home warranty, you will be responsible for maintenance and taking care of the
home. This may range anywhere from regular landscaping to major repairs.
Bottom Line
Like
everything in life, there are pros and cons. What is better for you depends on
your situation! If you are interested in becoming a homeowner and want to
discuss the pros and cons, contact a local real estate professional that can
help you review your current situation!
http://www.iloveleisurevillage.com
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