Liz McCune here with C4 Elite Real Estate Team and Coldwell Banker. People ask me whether they should rent or buy a home, several times a week. With this question comes strong and passionate opinions for both sides. Unfortunately, there is not one answer that fits all. There many factors that influence this decision for each person. Let’s take a minute to explore just three factors you may want to consider when deciding to rent or buy a home.
[su_button target=”blank” style=”stroked” background=”#1913d0″ color=”#fffdfe” size=”11″]Click Here to start your online search[/su_button]
Cost: Homeownership vs. Renting
When buying a home, most lenders or mortgage companies will require a down payment. This can vary widely from 3%-20% of the sales price of the home. Keep in mind though, there are some mortgage programs that offer no down payment. In addition to the monthly mortgage payment, there may be mortgage insurance, property taxes, homeowners insurance and possibly homeowners association dues. Most of these additional expenses can be rolled into your monthly payment. Mortgage calculators and home affordability calculators can help with rough estimates for these numbers.
When renting a home your upfront costs are generally lower and mostly fixed, at least for the term of the lease. The monthly rent may or may not include utilities such as gas, electric, cable or internet. Most leases require the first month’s rent, last month’s rent and a security deposit equal to one month’s rent in advance. In addition to these costs there may be an application fee. I know what you are wondering now, what does it cost to rent a home in Layton, UT, in Davis county? While this does vary, the average three bedroom home can cost anywhere from $1525-$2000 a month.
Advantages of Renting
As mentioned above, while renting, your monthly costs are mostly fixed. If you sign a lease for one year at $1500/month, you can budget for this amount knowing it will not change. This is especially true if your lease includes utilities. Flexibility is another advantage to renting. If you are unhappy or need to relocate, you can move once your lease is up. Additionally, if you do not like the neighborhood and get an offer for a different job, you can easily pick up and move. Furthermore, you do not need to worry about or budget for maintenance or repairs. A call to the landlord, as long as they are on top of things, and your are all set. Finally, along with not worrying about repairs you also do not have to worry about the housing market. The market fluctuates often and while renting you do not have to be concerned values increasing or decreasing.
Disadvantages of Renting
The biggest disadvantage of renting, the home is not yours. The landlord can choose to raise the rent or sell the home whenever they want or need to. They may wait until the end of your lease, but they may not. Unfortunately you have no control over this. This could be worrisome if you have children and schools are a factor. If you are a Do-It-Yourselfer and like to make your place your own, you must ask for permission. Any improvements to the home while you are living there need prior approval by the landlord. You lose the freedom to paint the bathroom or bedroom on a whim. Another drawback, when you rent, you are subject to somebody else’s rules. If you are eager to get a pet, you may not be able to have one as a renter. Furthermore, if repairs are needed you may have to wait until the landlord can get them to them. When the water heater goes out on a Sunday, you may not have hot water for a few days. Finally renting is an expense, you lose the opportunity to build equity in your own home.
Advantages of Homeownership
The first advantage of owning a home is gaining tax benefits. You can deduct your mortgage interest and property tax payments from your federal taxable income. If you do decide to sell your home, you can deduct your capital gains from the taxable income. You must claim the home as your primary residence for two out of five years in order to deduct the capital gains. Home ownership offers a degree of stability. As long as you make your mortgage payments the home is yours. You decide when and if you want to move. There is no landlord deciding what you can and cannot do while decorating and improving your house. Renovate, completely redesign your kitchen, plant your dream garden. Do whatever you want with your own home. There is a lot to be said for that freedom and it is something worth paying for. Finally, home ownership gives you the opportunity to build equity. Equity is the difference between what you owe on the home and the market value. It is the portion of the home that you truly own. This amount can build over time and many home owners chose to take advantage of their equity in the form of Home Equity loans.
Disadvantages of Homeownership
As a homeowner, you have several tax benefits, but you also must pay property taxes which the Municipal government collects. Secondly, the house is 100% yours and that means all repairs and maintenance process are your responsibility. You need to be sure to budget for unexpected expenses and maintenance issues. For some, the cost of the unknown may be too great to justify home ownership. Finally, if you decide to or need to move, the housing market may have shifted in a negative direction. In extreme cases,you may have to sell your home at a loss.
Home is Your Happy Place
As you can see the decision to rent versus buy a home is a big one and depends on many factors. If you know you are staying put for some time, have money for a down payment, and a good credit score buying may be your best option. On the other hand, you may rent if you enjoy the freedom to change locations quickly or have financial obligations that would make it difficult to save for a down payment. Either way, your home, be it rented or owned should be your happy place. The place you enjoy coming home to. After all its where your memories are being made. Call us today to gather all of the information you need to make the best decision for you and your family. We will help direct you to a great lender to discuss mortgage payments and help you budget for your dream home.