If a new home is in your future, you’ll have many things to think about when deciding where to live.
You may wish to be close to where you work, or you may need space to work from home. For those with kids or looking to start a family, good schools, playgrounds and other family-friendly amenities nearby will be priorities. You may also desire convenient access to shops, restaurants, entertainment and outdoor activities.
Another big decision you’ll have to make is whether to buy or rent a home. Important factors include how much you’re willing to spend up front and your desire for predictable monthly payments. Your decision will also affect how much control you have over design and remodeling decisions.
Let’s take a closer look at these and other considerations when deciding whether to purchase a home of your own or find a place to rent.
Buying a Home
Here are some key considerations for buying a home.
Invest for the Future
Purchasing a home is also an investment. Because the value of a home may appreciate over time, you’ll have the opportunity to build equity as you make mortgage payments. It helps to live in an area with a healthy job market, quality schools and desirable amenities.
Lock In Monthly Payments
If you take out a fixed-rate mortgage, your principal and interest are fixed for the life of the loan. That gives you more stable monthly housing costs for easier personal budgeting. When you rent a house or apartment, your landlord can change your rent at any time.
Enjoy Tax Benefits
When you purchase a home, you may be able to deduct the interest portion of your mortgage payment from your income taxes. The mortgage interest deduction is available on the first $750,000 of the mortgage for homes purchased after December 15, 2017. If you claim the mortgage deduction, you will be required to itemize instead of taking the standard deduction.
If you sell your home, you may be able to avoid capital gains on profits of up to $250,000 for singles and $500,000 for married couples.
Customize Your Space
When you rent a home or apartment, your landlord can restrict you from remodeling the kitchen or even nailing pictures to the wall. Purchasing your own home frees you from these restrictions. As the owner, you have complete control over whether to put in a new floor, paint the walls a different color or install new appliances.
Costs of Purchasing and Owning a Home
When you buy a home, you’ll likely owe a down payment along with closing costs to finalize the purchase. Down payments typically range from 3% to 20% of the final sales price. For example, if you purchase a home for $300,000, your down payment may be anywhere from $9,000 to $60,000.
You’ll also need to cover any maintenance or repair costs, such as fixing a leak or replacing an old water heater. Other costs of ownership include property taxes, homeowners’ insurance and homeowners’ association dues.
Renting a Home or Apartment
Here are some factors to think about before renting.
Renting may be a good option for those who expect to move in the near future, or for anyone whose job requires frequent relocation. A good rule of thumb is this: if you expect to move within 5 years, renting may be a good idea. If you plan to put down roots in your current city, it may be time to buy.
If you rent a house or apartment, your landlord typically pays for repairs. You will also not have to pay property taxes. Keep in mind, though, that your landlord will owe property taxes and may pass the cost on to you.
Your primary costs as a renter include rent, fees and a security deposit. Your landlord can increase your rent at any time, which makes planning your budget a challenge. Your landlord has the option of not renewing your lease which means you may have to move unexpectedly. Finally, you may not deduct the cost of rent from your tax bill.
Build Someone Else’s Wealth
When you pay rent, you are paying your landlord’s mortgage. This means you are helping him or her to build equity if the value of the property increases. If you purchase a property of your own, you have the opportunity to build that wealth for yourself.
While pondering the above considerations, the decision of whether to rent or buy often comes down to two basic questions:
- What are your housing needs? Do you need something for a single adult, a couple or a family with kids? Do you plan to live in the same area for the long term, or do you expect to move again sooner rather than later?
- Are you ready for a large purchase? Do you have a steady income and have you saved enough for a down payment? Are you prepared to make monthly mortgage payments? Will you be able to cover the cost of maintenance and repairs to your home?
If you’re ready to buy, Sturdy Real Estate is here to help. Our agents will work closely with you to find a home that meets your needs and fits your budget.
Give us a call at 417-881-3061 or reach out online to get started!