Seeing those big price tags on homes can be daunting when deciding whether mortgage vs rent is right for you. When you consider the long term impact on your wallet, the answer is clear. Buying a home is a better investment than renting.Verify your mortgage eligibility (Oct 22nd, 2020)
Mortgage vs Rent
The best way to evaluate whether you take on a mortgage vs rent a home is to compare costs. Look at how much you would pay in upkeep for a mortgage vs rent costs and expenses. The average 2-bedroom apartment in South Easton, MA rents for $2,400 per month. You can expect to pay an average of $31 per month in renters insurance for that apartment. Alternatively, the average home in South Easton is valued at $463,394. Using a mortgage calculator can give you a better idea on the total monthly costs for that property. When buying that average priced home, a South Easton resident can expect to pay $2,005.04 every month. That includes principal and interest payments, property taxes, and homeowners insurance costs. Comparatively, you would save over $400 monthly by buying rather than renting. That is more than $4,800 every year.
Current mortgage rates are at historic lows, which makes buying a home more affordable than ever. Also, your mortgage is predictable and should remain steady throughout the life of your loan. Rental rates are continuously increasing. It is reasonable to assume the average cost of a rental will be much higher in years to come. Buying an average-priced home instead of renting a 2-bedroom apartment will save you a great deal of money.
Upkeep and Maintenance
Outside of your rent or mortgage payment, there are other monthly expenses associated with home ownership. When renting a home or an apartment, your landlord should cover the cost of maintenance issues that arise. When buying a home, the expense of those maintenance issues come out of your pocket. The average American spends $1105 each year for home repairs and general maintenance. A general guideline for maintenance costs is to budget for 1% of the full purchase price of your home to go into maintenance annually. So, for a home valued at $463,394 you can expect to pay $4,633.94 in maintenance costs each year. That’s just $386.16 monthly. This does narrow the gap in what you saved over renting an average-priced 2-bedroom apartment, but not entirely. Buying a home still offers significant savings compared to renting a home.Verify your mortgage eligibility (Oct 22nd, 2020)
Let’s Talk Taxes
Tax deductions are frequently cited as being a key advantage in buying over renting. Without a doubt buying will save you money on your taxes over renting. At a minimum the interest paid on your mortgage is a tax deduction. After buying your home you may also qualify for tax deductions for paid property taxes or home office expenses. It is always recommended that you hire a professional to insure you get the most out of your annual tax filing.
Long Term Benefits of Buying a Home Vs. Renting
Homeownership is about buying peace of mind. At some point in the future your loan will reach completion. This means that there is light at the end of the tunnel. Eventually you will no longer have to make a mortgage payment. Once the entirety of your mortgage has been paid you will still have property taxes and maintenance costs associated with your home. However, these costs should be considerably lower than what you would otherwise be paying for rent. When you rent, there is no light at the end of the tunnel. That check has to be paid to your landlord no matter what. This is important if you ever hope to retire. When you retire, you need to find ways to make your income or savings go as far as possible. Not having rent due each month goes a long way.
Money paid for your monthly rent is gone forever. Homeownership is an investment. Rent is a debt. Owning a home gives you an asset. Even before you have paid off your mortgage, the equity buildup in your home gives you an asset. In fact, the largest asset for most Americans is the equity in their home. Home equity can give you a lot of financial flexibility. You can use it to pay for upgrades to your home. You can use it to pay for college. Your equity can also come in handy in case of an emergency. If you experience a medical emergency, you can use your home equity to get the care you need. Even if you do not want to keep your home through the entirety of the loan you have the option of reselling.Verify your mortgage eligibility (Oct 22nd, 2020)
The decision to choose between a mortgage vs rent can seem difficult. However, when you consider the decision based on potential return on investment, the choice is clear. There is no return on your investment when you rent because renting is not an investment. Buying a home gives you the opportunity to build equity or even rent it out in the future. If you are considering buying a home, Peoples Choice Mortgage can help guide you through your buying options.
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