Should I Buy or Should I Rent?
Hey everyone, Matt Sauer with Different Mortgage. Today I want to talk about a question that’s very specific to each individual’s situation: should I buy, or should I rent? This question is highly dependent on your situation but there are general principles and benefits of homeownership to consider.
Equity
When you own a home every payment you make goes towards equity. Unlike renting where your payment goes directly to the landlord with no return, owning a home allows you to build ownership over time. If you have a 30-year fixed mortgage once, it’s paid off that housing payment is gone, and you have financial freedom. Rents typically go up over time with no ownership benefits.
Inflation Protection
Owning a home protects you from rising rent inflation. As rents go up over time homeowners with fixed rate mortgages have stable payments and are shielded from market fluctuations.
Stability and Security
Homeownership provides stability especially for families. Renters face the risk of rent increases or unexpected moves if the property is sold. Homeowners have the peace of mind that as long as they make their payments they can stay in their home as long as they want.
Freedom to Create
Renters often have limitations on what they can do to their living space. Homeowners can remodel, decorate and truly make their home their own. This creative freedom adds to the pride of ownership and allows you to express yourself in your living space.
Appreciation
Real estate generally appreciates over time. Even with conservative estimates of 3-5% annual appreciation your property will increase in value. Many people’s primary source of wealth at retirement is their home. In high appreciation areas like San Diego this can be especially impactful, allowing homeowners to sell and move to lower cost areas, pay cash and still have a nest egg.
Long Term Benefits
Homeownership is a long-term investment. Historical data shows that despite market downturns real estate values recover and go up over time. For example, properties bought before the 2008 crash recovered and exceeded their pre-crash values within 10 years. With a 30-year loan the benefits compound as the loan is paid off and equity grows.
Financial Planning and Tax Benefits
There are big tax benefits to homeownership. Mortgage interest and property taxes are deductible. You must factor these benefits into your financial planning. Consult with a CPA and a mortgage advisor to get the full picture and make informed decisions.
Practical Tips
If you’re renting and thinking of buying take your potential mortgage payment for a “test drive”. For example, if your rent is $2,000 but your potential mortgage would be $3,500 start setting aside the extra $1,500 a month. This will help you get used to the higher payment and build savings for your future home.
Personalized Advice
Every situation is unique and while these general benefits are great, you need personalized advice. I’ve been in the industry for 20 years and owned multiple properties so I’m here to help you strategize and walk you through the process. If you need personalized advice reach out.
