Lifelong renters have what I call a renters mentality when it comes to owning a home. They try to equate the characteristics of renting with owning a home. The question I get the most is how much is my security deposit going to be? When owning a home, there is no security deposit. You are obligated to take care of all the necessary repairs and to keep insurance on the home. Lenders include this as a stipulation before providing you with a mortgage.
Over time, people who own homes accumulate more wealth than people who do not own homes. If you rent today, you may have lower housing expenses than if you bought today. But think about where you will be financially in the long term.
An excellent alternative to renting is obtaining a new home using a 100% or no money down minimum payment loan, which can offer minimum payments as low as $1,264.00 per month for $500,000 (and your credit score can be as low as 620 for most of these programs). Even though you won't build much equity for the first few years, the opportunity to see your home's value increase and the financial benefit of the tax deduction on the home loan interest make a strong argument to own instead of renting.
There are many reasons for owning a home versus renting a home. Owning a home is a source of pride, pride in your accomplishments and pride in your community. Owning a home gives stability to your family. Unlike renting a home where you are at the whim of your landlord, owning a home gives you the peace of mind in knowing that your payments are static according to your loan, you will not have to move unless it is because you want to do so, and if having a pet is important to you, then your home is indeed your castle!
Owning a home can also be a very simple tax shelter. For instance, let's say you are a married couple filing a joint return with a household income of $75,000.00 per year. If you were to purchase a home for $250,000 and obtained a loan at 6.125% with a normal down payment you will enjoy a tax savings of at least $3900 per year. Now if your property appreciated a minimum of 3% per year, it would be like putting $7,500.00 in the bank every year. There are many more reasons for owning a home, sit down with a knowledgeable professional and look at all the ins and out, you'll be surprised at the outcome!
While the possibility of having to pay for any repairs around the house, and having to mow the lawn, shovel snow, etc can seem like a disadvantage to owning a home, there are many reasons to buy anyway. Of course the reasons are different for everyone, but the most common reasons tend to be very similar.
One of the benefits of owning your own home is the tax benefits. The interest you pay each month on your loan balance is deductible, as are most of the closing costs of a loan. Consult with your accountant for more details.
Another difference between renting and owning your own home is the ability to build equity. When you rent, you are building equity in a property owned by someone else. When you own your own home, you are building equity that you can tap into at a later date. When you own it, your home becomes an asset, not just a roof over your head.
One difference between owning and renting a home is that as an owner you get to participate in any home price appreciation.
One of the differences between renting an owning is in your payment. When you own your home, other than slight increases in home owner's insurance and property taxes, your payment can stay pretty level for the life of the loan. When you rent, you should count on your payment going up every one to two years.
Owning a home is the first real step in wealth building for most families. But, aside from the obvious financial benefits, homeownership shows your pride in, and commitment to your community. That level of pride and commitment is usually not found among the more transient community of renters.
Owning a home is generally more expensive. Besides just the cost of purchasing a home there is the issue of time. Homeowners generally have a longer level of commitment to the property then a renter. Because of this they tend to take care of the property better and fix things that a renter might not.