Wise consumers realize that sometimes it’s smarter to buy a house rather than continually throwing their rent money away each month. Knowing the times when it’s smartest to purchase a home instead of renting one helps you to make the best decision for your budget.
When you purchase a home — particularly if you invest a down-payment of 20 percent or more — you start to build equity in the home. Equity is the difference in the amount of money that your home is worth versus how much money you still owe on it. Therefore, the money you spend on a mortgage payment is similar to a savings account in that you will recoup some of this investment once you sell your home. If you intend to live in the home for at least 5, 10 years or more, chances are good that you will sell the home for a greater amount than you owe. Thus, you can use that extra money for a down payment on another home or another expense. To build equity faster each year you can make one or two additional payment on the principal, instead of having the money divided between the principal and interest you owe.
Once a renter moves, he gets none of the money back.
Buying a home provides you with excellent tax write-offs. This is because your accountant can deduct the interest you paid on your mortgage and any repairs or remodeling costs that you spent during the past year. Mortgage points and loan origination fees are also tax deductible. You will pay less in taxes or get a tax refund. If you don’t pay at least 20 percent down when you purchase a home, you’ll have to get private mortgage insurance to protect the lender. This type of insurance is also tax deductible.
It’s easier to purchase a home than to rent one if your credit score isn’t very high. Most rental properties require you to have a very good or even excellent credit score. Rental property managers don’t want to waste time on renters who aren’t financially responsible. If you don’t pay your rent, they will have to go to the time and expense of finding someone else to rent the property, and the property could possibly be vacant for a few months or longer.
Purchasing a home can be a very smart move at times, and it’s wise to consider your options carefully before making that big decision. Asking yourself a few key questions before deciding to buy a house can help you make the right decision.
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