Renting VS. Buying A Home

Transcription

1 Renting VS. Buying A Home

2 US Mortgage Corporation (NMLS ID#3901). Corporate Office is located at 201 Old Country Road, Suite 140, Melville, NY 11747; or (800) (LOANS15). Licensed Mortgage Banker-NYS Department of Financial Services- AK, AL, AR, CA, CO, CT, DC, DE, FL, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MS, MT, NC, ND, NE, NH, NJ, NM, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, VT, WA, WI, WV, WY State Banking Departments/Regulators. Rates, fees and program guidelines are subject to change without notice. Some loans arranged through third parties. First mortgages only. Not all products and/or programs are available in all states. Certain restrictions may apply.

3 Table Of Contents The Perks Of Owning A Home Page 01 The Pitfalls Of Purchasing A Home...Page 03 The Reasons To Rent A Home...Page 05 The Downside Of Renting A H ome...page 07

4 The Perks Of Owning A Home A first-time buyer should know both sides of a coin before making a decision about purchasing a home. Buying a home has its own pitfalls but the perks are worth making the choice. The rising real estate prices can intimidate first time home-buyers; however, the pros outweigh the cons. You Are The Owner The pride from ownership is unbeatable. For most first-time buyers, investing in a home will be the first substantial transaction they make in their lives. You can have a sense of satisfaction of achieving a goal in life and having invested in your future. 01

5 Tax Exclusion A home-owner has his share of worries including payment on mortgage and property taxes. It is a relief that the government deducts these payments from the state and federal income taxes. You will end up paying mortgage interest every month for a few years after purchasing your home. This interest might be considered as a government subsidy and be excluded from your income tax. You can also get tax exemption on the expenses involved in the loan application process, closing costs on your home purchase, etc. Investment Benefits While living in a speculative economy, it is safe to say that the real estate prices will keep escalating for at least a few years. Home investment is like investing in stocks and shares. As you keep paying back the mortgage loan you took out for the purchase, the value and price of your home keeps rising. Consider that you buy a home for $100,000 this year and every year the price goes up by at least 7 percent. In a long term, your home will cost more than what you paid for it. It is a good way to invest in a home. You can flip it for a profit when the price escalates or you can accumulate your investments in a safe way. Exclusion From Capital Gains You can get exclusion from capital gains of $250,000 per individual if you own a home for more than two years. You can sell your house every two years and make a profit from the price appreciation without being subject to taxes up to the specified limit. Equity benefits Along with the price appreciation, the equity builds over time. Equity is the market value of the property you own. Equity and appreciation accompany each other. When you invest in a home, it becomes a part of your assets that keep increasing in value with time. You will be able to leverage the value of your home to take out home equity loans. Equity loans carry lower interest rates which are beneficial to those homeowners who wish to make more investments. Buy One And More You can buy more homes or make improvements to your existing home by getting a second mortgage loan from your lender. A lender will be happy to assist you with a second mortgage loan when you make regular monthly payments on the first. When you make your mortgage payments, you also earn equity value on your property. This way, you not only buy property, but also accumulate equity value with time. Security And Stability You have read many times that real estate prices are not going to decline in the near future. You can avoid the ever-increasing rent payments by just investing in a home that you can own and live in for any number of years regardless of the real estate prices. You will also feel secure about having a place to stay permanently. Contemplate on these benefits to make a choice on buying or renting a home. 02

6 The Pitfalls Of Purchasing A Home 03

7 Owning a home is like making a long-time commitment. The amount of work that goes into the investment and buying process is tremendous and may not be worth it in the present real estate scenario. Committed And Cannot Escape When you get a mortgage loan for purchasing a home, you are obliged to make your loan payments every month whether you can support your living or not. If you have to move to another city or state, you cannot sell the house until you finish repaying your debt. If you have purchased a home with a partner and you have relationship troubles, you can break away from the relationship with your partner, but the both of you may be stuck with responsibilities toward the home. It is a longterm commitment and you have no choice but to stick to it. Know About Foreclosure If you default on your mortgage payments or file bankruptcy, your lender can foreclose your home. It means that the lender will take possession of your house and sell it to redeem the balance amount that you have to repay. If you continue to live in the house for a while following the foreclosure, it is likely that you will be evicted from the property. Increasing Home Expenses Your expenses do not stop once you have invested in a home. Every month you will have to spend for the maintenance of your home, bills, taxes, and more costs. You will have to shell out money on repairs every time there is a broken faucet or a window. So, consider the pros and cons of home-buying before you make your purchase. 04

8 The Reasons To Rent A Home Renting a home is a smart way of spending your money. Like buying, renting also has its own perks that can sometimes outweigh the benefits of purchasing a home. The costs are quite less and you can always find homes that suit your lifestyle and your finances. It has many advantages; a few are listed below. Cost-Effective Way Of Life It is easier to pay for rent than invest in a home purchase. Since the prices are increasing, the rent price escalation will be relatively lesser than that of the prices for home purchase. You can find a rented home for any range that you look for without having to worry about credit report, mortgage loan approval, mortgage payments, and the rest of the worries related to home purchases. 05

9 Avoid Commitments When you purchase a house, you are obligated to make mortgage payments every month and spend money on maintenance and repairs. While you rent a home, you are financially flexible and are not bound to any of those obligations. The rent payments and expenses for your lifestyle will be your only concern. Live Your Dream You may not be able to afford a home when prices are high. For example, you may not be able to buy a home on the beach, but there is no reason why you cannot rent it. Renting provides you with many opportunities in the kinds of home you would like to live in. You can choose to live in luxurious homes when your finances can support you or in adequately furnished good homes when you are low on cash. If you are frequently traveling between places, renting is a good option since you do not have to worry about selling your house or sub-letting it. You can also choose to live in apartments or gated communities with gyms and pools, not having to worry about membership expenses. Let The Owner Repair You need not worry about the maintenance costs of the house. If you need anything fixed, the landlord will get it done. You do not have to spend on painting, carpentry, plumbing, or any other work to be done on the home. Renting a home comes like a package. As long as you pay the rent, your landlord will take care of the home furnishing expenses. Bills Included Your rent money will be a fixed amount that will mostly include the electricity bill and the water bill. You need not worry about increasing expenses for the bill separately, for that will be taken care of by your owner. Freedom To Move Is your landlord annoying? Does your neighbor play loud music at night? If anything is not right with your home, you have the freedom to move out and look for another. You might have to give a short notice of a week or a month before you vacate. In some cases, landlords will take a year s advance from renters to ensure they stay for at least a year before they vacate. No Tax Headaches A renter does not have to pay taxes like a homeowner. You might have to pay income taxes but anything to do with property liens, estate tax, etc., will be taken care of by the owner. In addition to this, you can get insurance for your rented apartment for a lower premium amount while compared to that of homeowners. 06

10 The Downside Of Renting A Home 07

11 Renting a home may be cost-effective, but it can also prove to be a waste of your financial resources in the long run. All For Nothing When you purchase a house, all the payments you make will be toward your property and its equity. However, your payments toward the rent will bring you no such benefit. High Cost Of Living With increasing real estate prices, you will have no knowledge upon the impact on the rent amount. Every year you will end up paying more rent to the landlord and also have to spend for your living costs. If you have rented the property on a year s lease, you would, in most instances, be required to pay a higher amount to renew the lease on its expiry. Inflexibility In Lifestyle You will have to adhere to the rules and restrictions imposed by the landlord when you rent a house. You cannot always have your own way by partying all day, inviting family or friends over, owning pets, or smoking in your apartment if your landlord has restricted you from doing so. You cannot make your own improvements to the house or design the interiors according to your tastes. Remember that you are not the owner. These chapters encompass the benefits and disadvantages of buying a home and renting a home. You will now be able to make an informed decision and choose what suits you best. 08

12 Corporate Office 201 Old Country Road, Suite 140 Melville, NY On US: 800-Loans