Renters See Benefits of Home Ownership
While the upfront cost of renting may seem cheaper, homeowners are throwing away their money and potential benefits that accompany owning a home. In fact, according to a recent Fannie Mae survey, 90% of renters expect to purchase a home in the next five years, but many believe it would be difficult to get a mortgage today. Renters who want to buy can weigh some of the financial benefits of buying, and take a different look at home ownership.
Instead of focusing on the total amount, buyers should think about what home ownership will cost them monthly in order to adequately compare renting and owning and to decide what works best for them.
Home ownership actually forces you to save. Instead of paying into your landlord’s pocket, you’re paying into your future, as each mortgage payment you make contributes to the equity you have in the home. As you buy further into your home and the value of your property appreciates, you’re actually making money. When you go to sell your house in the future, you’ll receive a return on your investment, rather than desperately crossing your fingers that you’ll get your security deposit back.
While the initial payment for a homeowner could be $110,000, the homeowner would pay a monthly mortgage of $1,000. A renter pays $800 a month, with a security deposit and annual increases of 5%. After three years, the homeowner’s payment would be less than the rental payment (with the tax savings of home ownership) and after six years, the homeowner’s payment is lower than the renter’s monthly payment.
Renters are fully subject to inflation. Each year, renters shudder to see their rents raised, as they’re forced to either pay the new cost or find a new place to live. The typical inflation rate for apartments is 4%, so over the years, you end up paying much more than you originally signed on for. When you purchase a home, you can choose to have a fixed-rate mortgage, meaning that the bulk of your living costs will remain unaltered by inflation rates. Renters, unfortunately, enjoy no such luxury. With today’s historically low interest rates, buyers have the unbeatable opportunity to afford quality, luxury living before mortgage rates increase.
Homeowners enjoy the fruits of their labor. When renting, even if you despise the tile in your bathroom or loathe the cabinets in your kitchen, you can’t do much about it. And if you can and do choose to take it upon yourself to make upgrades, the landlord is the one to benefit, not you. With a home, any and all upgrades you invest in and changes you make increase the value of your home and end up rewarding you in the end. You can install energy efficient features that will yield superior comfort and significantly lower monthly energy costs. You can make your space your own without wasting money and time. In addition to these freedoms, you’ll reap the tax benefits of home ownership as well. Home mortgage interest is tax deductible, bringing you significant savings when you file your federal income taxes.
Many factors go into the decision to buy, including future goals and personal priorities. These factors are extremely important and can rightfully determine what living options are best for your personal situation, but many potential buyers shy away from purchasing because renting seems cheaper at a glance. According to a recent Trulia survey, after factoring in the total costs of home ownership (e.g., closing costs, maintenance, insurance, taxes, etc) and total cost of renting (e.g., renter’s insurance and security deposit), it is around 35% cheaper to own a home in central NJ. Nationally, it’s 45% cheaper to buy than rent according to the same survey. If you’re looking to invest in your future and stay put for a little while, buying pays off. With mortgage interest rates still low and home prices down, now’s the time to buy.
About American Properties
American Properties Realty, Inc., is a family owned, New Jersey focused, award-winning, LEED Certified home builder based in Iselin, N.J., that is committed to earning the trust of each buyer who calls its communities “home.” American Properties Realty and its affiliated companies have created more than 15,000 homes: from luxury single-family estates to master-planned communities of apartments, condominiums and townhomes. American Properties Realty prides itself on delivering the right home in the right place at the right price. Its residential communities have an unsurpassed reputation for quality craftsmanship and extraordinary value in creating community-oriented homes in premier locations. For more information please visit www.americanproperties.net or call 732-424-0190 or find us on Facebook at www.americanproperties.net/facebook.