Should you buy or rent? This is a fundamental question facing many potential homebuyers, particularly first-time buyers. There certainly are circumstances in which renting might make more sense if:
- More flexibility is needed
- You need to save for a down-payment
- You will be relocating within the next 2 years, or
- You need to improve your credit score…
However, if one is eligible and so include there are several key advantages when it comes to homeownership. Here are five benefits to buying a home today.
Record Low Mortgage Rates
We know, we know, you keep hearing “record low-interest rates,” but that’s because rates continue to fall to new lows. In fact, the 30-year fixed-rate mortgage averaged 2.88% for the week ending August 6, marking the 8th time this year that mortgage interest rates have slipped to their lowest level. To put 2.88% in perspective, keep in mind rates were in high teens(!) in the early 1980s. Lower mortgage rates allow you to afford a more expensive home for the same monthly payment (or the same house for a lower monthly payment), so low rates are very enticing to prospective buyers.
Fixed Housing Costs
Renters, particularly those in hot neighborhoods, know it’s all too common for landlords to raise the rent when it comes time to renew their lease. On the flip side, when you take out a fixed-rate loan to buy a home, you can rest assured your monthly mortgage payments will be consistent through the loan term, with a fixed 15- or 30-years mortgage. And while rents generally rise with inflation, homeownership is a great hedge against inflation.
One of the most attractive aspects of homeownership is the ability to build equity. As you pay your loan each month, the debt of a mortgage gradually becomes an asset. Homeowners also build equity when the value of the property increases. That means homeownership provides an opportunity to accumulate wealth over time. Periodic updates can also add value to your home, enhance your enjoyment of it, and are generally not allowed or something you’d consider when renting.
Tax deductions for mortgage interest and property taxes provide a financial incentive for homeowners. Despite the fact that deductions were reduced under the 2017 Tax Act, homeowners can still deduct up to $10,000 in state and local income tax and/or property tax, and can also deduct interest on a mortgage up to $750,000.
The Value of Home
We have outlined several financial benefits that come with homeownership. But over the last six months, “home” has taken on a whole new meaning and made the prospect of being a homeowner more attractive for a variety of other reasons. For some renters who had planned to buy a home at some point down the road, COVID-19 has pushed up their timelines as their needs change and as they look to take advantage of low-interest rates. There is a renewed focus on the value of home and the features that have become more appealing recently— whether it’s a home office, outdoor space, or flex space. Homeownership offers a great opportunity to buy (and personalize) that home that has everything you have been wanting and to plant roots in a community you love.
For more detailed rent-versus-own-analysis, be sure to contact me. I can help you make the best choice for your situation.
The featured photo is of a home sold by Marissa Hopkins at 995 Harvard, Highland Park.
Written by @properties
Modified by Marissa Hopkins, Broker