Renting Or Buying: Which Is Right For You?
Every little kid used to dream of growing up to own a home, but recent economic circumstances have begun to redefine the American Dream. The amount of Americans renting has climbed over the last 50 years. In financially turbulent times, many people are wary of the investment that owning a house requires. Sometimes, it just makes more sense to rent than to buy. If you’re starting to wonder which is right for you, you might want to ask yourself a few things:
Regardless of whether you’re renting or buying, timing will play a big role in your financial choices. The goal isn’t only to find an affordable home but to later reap financial rewards from home owning. This means that how long you keep the property matters. Let’s assume that, like most Americans, you have two options: you can pay 20% of a home’s value in the form of a down payment or rent and anticipate a 5% increase in the price of renting every year. Owning a home would become the better option only after at least 2 years.
Turning a profit on homes is harder than ever. Two-thirds of homeowners in the U.S. are waiting till 2025 to cash out since (according to a report from Trulia) their homes still haven’t returned to what they were worth before the recession. Having debt is risky, and the freedom of a 12-month lease means that you can move and make changes according to your changing income and needs. Buying a house, unfortunately, doesn’t allow you to do this.
Both buying and renting come with secret costs that may not be immediately apparent. If you’re a renter, you won’t be accruing home equity. And unlike your home owning pals, you will be ineligible for homeowner tax breaks. If you do choose to own a home, you might qualify for as much as $3,585 in tax breaks every year (if you were within a 28% income tax bracket, and had a mortgage of $200,000 with an interest rate just higher than 4%). Unfortunately, you’ll have to pay for things that renters don’t have to worry about, like:
Having a home of your own is a good way to build your investments, and your money will grow as your home equity does. Unfortunately, on a monthly basis, buying and maintaining a home is more expensive than renting everywhere in the US. Most of us have less than $5000 in our savings account. Couples who are nearing retirement only have about $125,000 put away. Spending money unnecessarily on a house can drain one’s resources, making it more difficult to accumulate savings for your retirement. Lower monthly costs allow you to put money into 401k’s and IRA contributions. If you were able to save $500 per month on your housing costs starting when you were 50 and invested it for a return at 7%, you’d have nearly $169,000 more in your account when you reached 66.
In the long run, home owning is likely to be a great investment. But if you worry about not being able to stay abreast of the costs, or if you feel that you’re having trouble saving for your future, renting might be a good choice.
Hopefully, this information helped you. Want more? Just contact us. Our mission is to turn ugly houses into beautiful homes, linking wonderful people and amazing properties. We provide more than real estate: we provide real estate solutions. Whether you need help buying or selling, we’re here to provide you with friendly and efficient customer service.
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