Right now, there is a lot of talk about whether this is the time to buy…or if it’s smarter to hang in there until “the market drops again”. Regardless of what you’ve heard, it’s hard to disregard the cold hard facts – right now is a prime time to buy real estate. If you’re one of the many renters out there, stop paying someone else’s mortgage and start putting your money into one of the best investments you can make: a home.
Why More Should Buy – Never in history has the average rate on a long-term fixed mortgage been as low as it is now: 3.91% for a 30-year home loan and 3.21% for a 15-year home loan. Rates continue to hover below 4%, but there is no guarantee that they will stay this low forever. These amazing rates also make now a great time to refinance!
Why More Aren’t Buying – Too many potential buyers can’t afford the required down payment, are out of work, lack a sufficient income or are burdened by large debt loads. Home prices have sunk at least 31% since the housing boom four years ago, leaving many Americans fearful that prices have yet to bottom.
If you’re at a time in your life where it is financially possible to buy a home, and you’re still renting, think about the pros and cons:
Renting
Advantages
- More fixed costs for the term of the lease
- Not gaining equity, but not losing it either
- When the lease is up, you can just move
- There is generally less work in maintaining a home or apartment you don’t own
- Smaller amount of “up-front” cash needed
Disadvantages
- No matter what happens with the value of the home, you will never gain equity
- Limited -or no- ability to personalize your living quarters
- No tax advantage to renting. Your landlord gets any and all tax breaks that are available
- Variable costs
Buying
Advantages
- Over time, the mortgage balance decreases and equity builds, even if the value of the home does not increase
- The ability to remodel and redecorate the home to match your needs and desires
- There can be tax advantages attached to home ownership – consult competent legal and/or accounting advice for details on your situation.
Disadvantages
- Equity may go up, or down, or stay stagnant
- If you want to move, the home generally must be sold or leased to renters
- Work needs to be done by you — or paid for by you
- Generally a larger initial investment (down payment)
Why Buy As Opposed to Renting?
We’ll break it down -
1. It’s not as expensive as you might think. Mortgages are cheaper now and it’s easier than ever to get a 30-year loan for less than 4.0%; the lowest rates on record.
2. You will save on taxes. You can deduct the mortgage interest from your income taxes and real estate taxes and you’ll get a tax break on capital gains -if any- when you sell. The breaks are more valuable the more you earn; as well as the bigger your mortgage. Many people have found that these tax breaks are one of the greatest benefits to buying.
3. You can paint the walls! The home will be completely yours to renovate, paint, put in a pool….or do just about whatever else it is you’ve been dreaming to do. For most rental properties, these changes are often impossible.
4. Good rental properties are hard to come by. In many parts of the country, it can be tough finding a good rental; as many of the most desirable properties out there are not for rent.
5. It’s a smart financial investment. According to Professor Karl Case, “studies have shown that over the long-term, housing has tended to beat inflation by a couple of percentage points each year.”
6. There are plenty of options out there. The National Association of Realtors puts the current inventory at approximately four million homes, but more continue coming onto the market as banks slowly unload their inventory of unsold properties. This means great choices as well as great prices.
So think about it…but don’t think too long. Who knows how long these rates (and prices) will last?
Information taken from Derek Kravitz December 23, 2011
