Are you still renting a home or apartment for yourself or your family?
If so, you’re losing money. Think about these three ways you lose money by renting:
- You’re paying for someone else’s mortgage payment. You’re missing out on the appreciation that the property gives to the landlord. Appreciation is a term used in accounting relating to the increase in an asset’s value, which means added value to the property in real estate terms. Over the past five years, houses appreciated significantly, making many new real estate investors multimillionaires.
- Renters don’t get to freeze their monthly housing expenses as home buyers can. Of course, many home buyers get mortgage payments with adjustable interest rates, and their payments go up over time. However, these payments will not go up over the long term, like rising rents. Just think about how much an apartment costs today compared to ten years ago. A two-bedroom apartment in Lake Elsinore, California, leases for $1,000 today. The same apartment rented for $325 in 1996 when it was brand new. Homebuyers who had low monthly payments in 1996, who did not refinance their mortgage, enjoy low payments and don’t have to worry about rising rents.
- Renters don’t benefit from tax advantages. Homeowners get income tax deductions. Tax deductions for interest costs, for instance, save taxpayers thousands of dollars.
Emotional Satisfaction of Home Ownership
Besides losing out on making money with real estate, renters don’t get the same satisfaction of home enjoyment that benefits home buyers. Many landlords won’t allow you to paint your walls in the colors that you desire. You won’t feel like fixing up the property with custom window coverings, and you get little say in flooring materials. Because you can’t make your personal statement, you won’t feel like you’re HOME as much as homeowners who feel emotionally connected to their property.
How to Buy Your First Home
The biggest barrier to homeownership is often accumulating funds for a down payment. People think they have to have thousands of dollars for a down payment. However, if you have good credit and a decent job, you can get a mortgage for a home with zero down. And you can finance some of your closing costs as well as ask the seller to help you pay a good portion of your purchase costs. With today’s mortgage finance plans, you may be surprised to find out how much of a home you can afford with payments similar to what you currently pay in rent.
You may have to go out of the major metropolitan areas to buy a home. That’s why so many people commute in Southern California. Affordable housing costs much less in outlying areas. But so do the rents. If you’re renting an apartment for $2,300 in Los Angeles, you could buy a $500,000 home in Wildomar. A friend’s daughter purchased a home in December 2005, and her mortgage payment for a 3,000 square foot new home costs less than $2,300. She will pay even less than renting a small apartment closer to downtown L A with her tax savings. Under the new tax law, state and local taxes are capped at $10,000 and the standard deduction equivalent now deducting your taxes more difficult unless you are in a high tax state with other deductions that total over $24,000 for a married couple.
If these amounts sound high to you, check your local area. Perhaps your monthly rent is only $1,000, and houses cost less than $200,000. Talk to a mortgage loan officer and see how much of a home you can afford. At the following website, you can get a suite of Excel spreadsheets that can and will make your financial lives easier. To learn more, visit Simple Planning.
If you’re renting, make one of your priorities to buy your own home.
Listed on https://personalfinanceblogs.com/, KG Meyer P.C.’s blog is found with hundreds of other great blog posts on just about everything: personal finance.
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