Why Does Buying a Home Make More Sense than Paying for a Rented Home?
July 8th, 2021 by Administrator
When you live in a rental property, stepping into your own ‘home sweet home’ after a long day of work might be something that you wish for every day. Understandably, you are not looking for it actively thinking that it is not within your budget or home financing is a too big commitment. If this resonates with your thinking pattern, it means you are not looking at the bigger picture. Not only having your own home gives you enormous satisfaction and freedom but it also eases your financial burden by renting a part of your home.
Even if buying a home is not your cup of tea, this post is for you. Today, we will talk about why you should buy a home and what makes investing in a home worth it.
Top Reasons for Why You Should Buy a Home
Buying a home can be cheaper than renting
Undeniably, the cost of purchasing a home seems daunting to people, especially first-time buyers. While the upfront cost of buying a home is higher than a month’s rent, the number gradually levels out usually within the first five years.
Let’s take an example of a home that costs around $500,000. The monthly rent ranges from 0.8% to 1.1% of a home’s value. Thus, in this case, the monthly rent would be $4,000 at the low end. If you buy that home using an FHA loan, you will need to pay a 3.5% down payment. We are assuming, here, that the interest rate is 4.5% on a 30-year fixed-rate mortgage, the property tax is $2,400 per year, and home insurance is $1000 per year. With these variables, your mortgage payment would be $2,728.09 a month.
Yes, the closing costs and the down payment are hefty at first, but you will find monthly mortgage payments to be lower, which will neutralize those costs over time. Thus, after a period of five years, you will begin to notice a higher and higher level of savings as compared to the rent prices.
The Worth of Your Home Will Increase Over the Next Few Years
The cost of a home most likely appreciates within the first few years. It might appreciate at a faster rate if you buy a home in a good neighborhood by leveraging the expertise and local knowledge of a real estate broker. It means the value of your home may be more than you’ve purchased it for. If your home appreciates at 2% a year, it implies that it will have appreciated by 10%. Thus, home ownership is a long-term investment that rewards you in the future.
Besides, possible tax deductions are another thing that you should also consider. Several tax laws allow you to deduct the cost of interest that you pay for your home. On the contrary, rent money never rewards you in any way.
Help You Build Equity
Unlike the monthly rent that goes directly to your landlord’s pockets, the mortgage payment benefits you as it is paid to yourself in the form of equity. Not clear? Let’s see it a different way.
Equity is the portion of the fair market value of your home that you own directly, outside any liens or outstanding mortgage balances. As you continue to pay your mortgage towards your principal amount over years, you have more and more access to your home’s market value.
Plus, as the equity of your home increases, you can turn that equity into cash through refinancing and keep more of the proceeds from your home. Besides, you can also pass that value on to your next generation.
Settle Down and Increase Your Stability
While people who rent a home may like enjoying the freedom to relocate anywhere, it might feel like a liability as you grow as a family, get older, or want to settle down at a particular place. Living in your home in the same place for years provides you with a sense of belonging. You feel that you are a part of the community. So, figure out a location where you want to live for the long-term and start looking for a home for sale in that area or its neighborhood.
The stability of having your own home looks like a blessing when you see rents go up at the end of a lease. In many states, there is no limit to how much landlords can increase your rent. Besides, most landlords don’t allow you to modify the property or make changes to a rented home. Sometimes, even painting it with the color of your choice seems impossible.
On the other hand, home ownership doesn’t come with such restrictions. You have complete independence, and you can make your own decisions regarding remodeling or renovation projects anytime you want.
To make it more affordable for you to buy a home, there are various types of home loans that you can learn about and might be eligible for. Some examples are FHA loans, VA loans, USDA loans, and conventional private loans with low down payments.
So, when you can afford to buy a home, don’t hold back. Get in touch with an experienced local real estate broker and make your dream home a reality.