Renting a home versus buying one...who comes out on top? Buying! Let me give you 3 undebatable reasons why:
1. It is YOUR PropertyOwning your home means you can paint your kid’s room any color you want, change all your floors from carpet to wood, and you can put a new chandelier in the dining room. All without asking a landlord for permission. And sometimes, making these home improvements will increase the value of your property.
2. Appreciate in Value, Including Leverage of Cash InvestedOwning a home is an easily understandable investment because people get the tangible daily lifestyle benefit of living in their own home. However, the financial benefits are also significant, and can be more substantial than stock investing. As a home appreciates, it accrues faster than a stock might because you get the appreciation on the entire home’s value, not just the gain your down payment cash invested. For example, if you bought $30,000 in stock and it appreciated 3 percent per year for three years, you’ve gained $2,782 on top of your $30,000 invested — and if you sold, you’d pay taxes on that money gained. If you buy a $300,000 primary residence with a $30,000 down payment (representing 10 percent down) and it appreciated 3 percent per year for three years, you’ve gained $27,818 on top of your $30,000 invested — and if you sold, you’d be exempt from paying any taxes on that money gained.
3. Tax BenefitsHomeowners are allowed to deducte mortgage interest and property taxes when they file tax returns each year. Using the same example of $300,000 home purchase with 10 percent down, a mortgage calculater shows a total monthly housing cost of about $1,731, with $1,231 in principal and interest (using a rate of 3.625 percent), $300 in property taxes, insurance of $67, and mortgage insurance (required when putting less than 20 percent down) of $133. The tax deductions homeowners get for mortgage interest and property taxes save $335 per month in taxes, so subtract this from total monthly housing cost of $1,731 to get an after-tax housing cost of $1,396. This significant savings from tax benefits can often make owning the same as, or cheaper than, renting.
So next time your lease is up, consider buying with us!