When evaluating your personal financial landscape, it can be easy to make assumptions about what you can or can’t do with your money. For example, you shouldn’t buy that brand new laptop, or maybe you can splurge a little bit on a new hoodie. Smaller purchasing decisions are typically easier to determine as they tend to be paid out of pocket.
But what about longer-term purchases that can be paid monthly? How is that payment going to fit in with your other recurring bills/responsibilities? The most common purchase that can cause confusion is in your housing situation. Most people look at buying a house as a huge expense. In all reality, it is likely the largest purchase someone will ever make – and it can be a little intimidating when you look at the bottom line number. This is why many choose to rent, because the perception is that it is cheaper.
In fact, a recent study in 2019 found that 82% of renters view renting as more affordable than homeownership. That percentage is actually 15% higher than the previous year, meaning that this is a growing belief among the renter community. But just how true is that?
Location, down payment, property taxes and other factors also play a role in cost comparisons. For example, using Trulia’s calculator, we see that a $115,000 home in the zip code 44514 with a 30-year fixed FHA loan is actually cheaper than renter after just two years.
Naturally, there are many factors to consider in your decision to buy or rent such as: family situation, how long you intend to live in a particular city, etc. However, it’s important to account for the many advantages to homeownership. In today’s market, the time has never been better to make the move from renting to owning. Here are a few things you should consider:
There’s no way to build equity in a rental property, but in your own home, you can. For example, if you put 20 percent down on a $100,000 home, and use a loan to cover the rest, you technically have $20,000 in equity.
Any interest paid from a loan on your primary residence (your home) is tax deductible. This alone can save you thousands of dollars a year, compared to renting.
Typically, when you review or renew your lease, your rent will increase. However, with a long-term, fixed-rate mortgage, the principal and interest payment never go up.
Above all else, before making a decision, you need to be educated on all of the options available to you. Our Amerifirst team happens to be specialists in this area and provide free pre-approval strategy meetings before any commitments are made. If you would like to schedule a meeting with our team, click here.
*Not intended as accounting or investment advice. Contact your tax preparer for more information.