Buy or Rent
No doubt you've thought of how nice it would be not to write a
rent check every month, but have you done the math? Nothing can make
you feel more secure than owning your own house, unless buying a
home will create financial problems of its own. Here's a discussion
of the most important financial costs associated with home buying to
stack up against your monthly rent check.
Instead of the standard deduction on your income tax return, most
homeowners itemize their deductions, allowing them to deduct the
following (and save on taxes): home mortgage interest, property real
estate taxes, state income taxes, gifts to charity, medical and
dental expenses over 7.5% of your income, personal property taxes,
and most moving expenses.
Figure your monthly payments if you were to buy. Compare your
monthly rent to a calculation of the following: purchase price and
down payment of your home, your annual income (and debt!), property
tax rate, home insurance rate, interest rate and length of loan. For
best results, contact a home-buying specialist.
Other costs
Expect other costs to homeowning. Along with your monthly
mortgage and down payment, there's property tax and homeowners
insurance premiums, and fees known as "closing costs."
These include everything from a credit check to "points"-
interest paid up-front in return for a lower interest rate. Others:
title insurance fee, survey charge, attorney/escrow fees, and loan
origination. So do your research!
Long-term equity
No discussion of home ownership is complete without considering
the long-term benefits of owning. What your house will be worth when
you sell depends on the state of your mortgage and the housing
market, in particular. Consult with real estate professionals, read
up, and do your math to get a realistic sense of your future home
value.
Lifestyle and mobility
Mobility is part of renting. Freedom to take the next job or
move for a relationship is easy to come by when you rent a home. And
when you do move, there's often more choice of specific location,
and price, when you seek rental housing. Want an apartment near a
park in western Philadelphia? You may find an easier time looking to
rent than buy.
Many renters say they love knowing they're not tied down - and don't
have to assume financial responsibility for their living space. This
is of course a big difference from home ownership: who does the
work.
Who does the work
While you don't receive the joys of making a place truly
"your own," you do have limited costs in renting.
Landlords are responsible for general upkeep and safety, allowing
you to focus on the fine points. Homeowning, in contrast, puts you
in the driver's seat. You shoulder the expenses and reap the rewards
of home improvement - both great and small. Think about whether you
want to put in additional time and money.
Choices, choices
Whether you decide to take the step of home ownership is a
personal choice with its own ups and downs. Hopefully we've helped
dust off the magic ball a bit; what you see in your future is up to
you!
