Continue to rent? Or is it smarter to buy?

Posted by The Cascade Team Real Estate on Wednesday, October 16th, 2013 at 11:02am

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Many prospective home buyers may have questions or concerns as to whether they should continue to rent or if buying a home now is a smart idea. Home ownership provides numerous benefits to both the individual home owner and to the community they live in. Studies have been conducted that attribute greater success and achievement in school to those children whose parents are home owners. Communities are also impacted in other positive ways when there is a higher percentage of home ownership within a community. 

Aside from the social implications, prospective home owners still need to consider the “dollars and cents” when looking at a “Rent vs. Own” comparison. An Axia Mortgage Professional can walk you through the steps and help you with a comparison for your specific situation. Before getting started with one of our mortgage professionals, here are a few basic principles to know and a few comments that will help you with a comparison:

  • As most buyers will obtain a fixed rate, fully amortized loan (meaning that the loan balance is decreasing each month until the loan is fully paid), part of each monthly payment is reducing the loan balance and increasing the home owner’s equity position(“Equity”is the difference between what the home is worth and what the existing loan balance is).
  • Think “Equity” = “Savings”. Whatever you may be paying in rent each month is going towards increasing your Landlord’s equity and/or savings. YOU are the one paying off your Landlord’s house! Even when a mortgage payment is several hundred dollars more than rent, (and in certain markets you may be able to own for the same or less than what you pay in rent)a portion of your payment is going toward your equity position. One way you might think of this is that by making your mortgage payment each month you are contributing to a mandatory savings plan!
  • In addition to the equity that home owners acquire, many home owners may benefit from lower taxes due to a “mortgage interest deduction”. Not every home owner will benefit, but for those that do, this reduction in their tax liability may allow them to change their withholding taxes from their payroll and take home more money without owing the IRS at the end of the year.  This can help when the mortgage payment is several hundred dollars more than what their current rent payment is. Of course, potential homeowners should seek the counsel of a licensed CPA or Tax Professional to see if this deduction would apply to their circumstances. And as the mortgage interest deduction seems to be a hotly debated topic in congress, it’s hard to know how long this deduction may remain. Still, it currently is a benefit for many home owners.

Call an Axia Mortgage Professional or connect with us on-line to learn more about a “Rent vs. Own” comparison for you!

The Cascade Team Real Estate

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