Is now the right time to buy a home? Here's some tips to see if it makes sense for you.
With today's market being flooded with homes to choose from now is the time to start looking. Interest rates are starting to climb, if you were considering buying a home - now is the time to make your move while you can still afford to get into the game. Rates are still low enough that you could very well have a monthly mortgage at the same cost of renting, why give your money away when you could own your home today. For starters, it's not that simple. While owning a home has many benefits -- and they're not all financial -- the cost is more than simply the mortgage payment. So which option is right for you? It depends on your financial situation, your plans for the future and, perhaps most importantly, the lifestyle you prefer. |
Buying |
| Renting |
Potential tax break You can usually deduct mortgage interest on your tax return, which can mean big savings. If you're in a 28% tax bracket and have a $150,000 mortgage at 7%, the first full year you own your home you'll most likely be able to deduct more than $10,000 in interest. That translates into a tax savings of almost $3,000. In addition, even if you sell your principal residence for more than what you paid, you may not have to pay capital gains taxes. (There are limits, so consult a financial advisor for advice on your particular situation.) |
| Less financial pressure Low mortgage rates have, in recent years, narrowed the gap between the cost of buying and renting, but the overall cost of renting is still usually less. Insurance, taxes, utilities and maintenance can add 40 percent to a homeowner's true monthly expenses. The upfront costs of renting -- typically just first and last months' rent -- may also be much lower. |
You can build equity No matter how much rent you pay, 100 percent of your apartment still belongs to your landlord. But every time you make an amortized mortgage payment, you own a little more of your house. Initially, interest makes up the vast majority of your payments, but the proportion is constantly shifting in your favor. If real estate values rise, you'll be even farther ahead. The longer you plan to stay put, the more of this benefit you will reap. |
| Fewer responsibilities Make no mistake, owning a home involves a lot of time, energy and money. Some problems, such as a leaky roof or broken furnace, can end up costing thousands of dollars. When you rent, that's someone else's problem. Renters also avoid the stress that can come with carrying a large mortgage, including the worry that the housing market may take a downturn. |
Pride of ownership A house may be an investment, but first and foremost it's a home for your family. Even without the financial benefits, many people like the stability and sense of pride that comes with owning a home. You can renovate it to suit your own needs, plant a vegetable garden in the back and let the cat scratch the walls knowing there's no landlord to impose his or her rules. |
| More freedom Many people feel tied down by the idea of a 30-year mortgage. Even if you would like to own a home eventually, renting may be a better option if your short-term future is uncertain; for example, if your job is not secure enough for you to take on a long-term commitment, or you've recently moved to a new city and you're not sure whether you'll stay. When you do decide to move, you won't face the commissions, taxes and other fees associated with selling a house. |
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