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As real estate prices rise, many renters are asking the question, “Is this the right time to buy a home, or should I keep renting?” Buying property may seem daunting, both from a cost and commitment perspective, but there are many reasons to do so, even in a competitive marketplace. While it may not be appropriate for everyone, homeownership is a great opportunity that should be strongly considered by anyone stuck in the renting cycle. Here are some of the reasons why buying a home and escaping rental living could be in your best interest.
1. Buying a home is an investment
Many people look at mortgage payment calculators and see thousands of dollars pouring out of their pockets in order to secure a place to live. But each month you own your home and pay your mortgage, you are creating equity which can be used in several different ways. Aside from huge lending and credit benefits, money paid into a mortgage will come back to the owner the day they decide to sell, along with any profit from increased valuation on the property. Granted, there are significant interest payments required on a mortgage, but no matter the rate, it’s still exponentially better than 100% of your monthly payment going directly to a landlord.
2. Ownership creates stability
Anyone who has ever rented understands the stress involved with living in uncertain conditions. Renters perpetually face a situation where lease terms and conditions hang over their heads, and they need to plan ahead for the worst-case scenario of the landlord selling the property. With home ownership, there is never a concern about how long the property can be occupied, or who is allowed to live there. Another benefit of this stability is the freedom to alter the property as desired. Want to buy a dog? Expand a bathroom? Move a shed? When you own your home, these are all things that can happen without consultation with a landlord.
3. Mortgage rates are historically low, but may start rising again soon.
Mortgage interest rates are a very important part of homeownership. Over the term of a mortgage, a fraction of a percent can equal thousands of dollars in interest paid to the lender. Even with a recent surge in rates, the average 30-year fixed rate is still hovering near all-time lows. Due to this historical dip, it can be expected that rates will rise in the short to medium-term future, which will cost owners significantly more in interest payments.
Taking advantage of low-interest rates is a great way to maximize value in a purchase, and it is highly recommended that potential owners seize this opportunity while they can.
4. Tax breaks
There are a number of ways homeowners can use the purchase of a home to their advantage when it comes to taxes. From borrowing from retirement funds to make a down payment, to deductions and credits on mortgage and interest payments, to home improvement credits, the tax system creates several ways for homeowners to benefit from their homes.
As an example, a couple buying a $500,000 home could withdraw $20,000 from their IRA’s without penalty to put towards a down payment. Once the house is purchased, any interest paid on the mortgage can be deducted, and depending on the couples’ incomes, a credit would also be applied.
5. Generate revenue by renting
After a lifetime of renting, wouldn’t it be nice to flip the script and be the one getting paid every month? Whether it be a basement suite, Airbnb, or long-term rental, there are numerous ways to profit from a property. An owner can use their home to create a reliable and lucrative revenue stream from short, partial, or long-term renting, all while creating equity for themselves.
6. It begins a legacy
Financial reasons aside, purchasing a home can be the beginning of a family’s life story. Homes are a part of people’s history, and can stay within a family for generations to come. We’ve discussed all the monetary reasons why owning a home is a benefit, but no one can put a price on building a life in a place that you love.
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