At some point in our lives, many of us face the question: “Should I buy, or should I rent?” Buying a home is one of the largest financial decisions you will make in your lifetime, so you must be aware of the ups and downs to purchasing a piece of real estate…along with your reasons for buying or renting. Following are some of the most important points to consider…
(-) Owning a piece of property requires more responsibility than renting. For example, if you have a plumbing problem at a rental, you can call the landlord or the manager to send someone out to fix it. If you own the home, you are the person responsible for calling the plumber (…and paying for it).
(-) Owning real estate can be very costly, especially in desirable areas like Santa Barbara. Some costs to consider are a down payment on a property, your monthly mortgage payment, homeowner’s insurance, property taxes, utilities, and both ongoing and any deferred maintenance.
(-) Renting can be more flexible than owning a property. You could be in and out of a place within a month! If you are at a point where you are moving around a lot, this could be a better option for you.
(+) Owning real estate is a great achievement that creates stability, security, and a pride of ownership. Homeowners tend to stay in their properties much longer than renters, and they have more control over their environment. You can paint your bedroom orange, change the landscaping, or remodel the kitchen if you want, and you are not subject to the terms of a lease. As a homeowner, you can know what to expect and how to plan for your housing expenses each year, since most mortgages have fixed or capped monthly payments.
(+) Homeownership is the primary component of wealth for many Americans. Most homes appreciate in value over time, whereas most rents increase over time, and you cannot build up equity by renting. Data from Harvard University’s Joint Center of Housing Studies illustrate not only that the median net wealth of homeowners is 34 times greater than that of renters, but also that over half of that wealth is generated from home equity. As you pay down your loan amount each month, you accumulate equity, a growing ownership interest in your property. If you need funds, you can borrow against this equity in the form of a home equity loan.
(–) “The American Dream.” California Association of Realtors.
(+) Owning a home creates tax benefits, while renting offers no tax benefit. Interest on a home mortgage and property taxes are tax-deductible. If you take out an equity line, interest on a portion of home equity is tax-deductible as well.
The bottom line is that buying real estate is a very personal decision. If you are considering what is best for you, make an informed decision by contacting your financial advisor, a mortgage lender, and a Realtor ™ to help you discover your options. A mortgage lender can help you analyze how much “house” you can afford, and a Realtor ™ can work with you by helping you to see if you can find a property that offers the amenities you need and that is affordable to you!
Please send your questions and comments to Emily@EmilyMcBride.com.