To rent or to buy? How a mortgage loan could save you money.
Home ownership seems like a very grown-up proposition, doesn’t it? There’s just something about mowing a lawn and making repairs that reminds us of our parents.
But, a home doesn’t just mean a house in the suburbs. It can mean a condo or a townhome, too. Given that, home ownership can really make sense for a variety of different people.
So what does “make sense” mean exactly? Well, there are many benefits to a mortgage loan that you may not be aware of, like: payment stability, tax advantages, equity, as well as many other intangibles.
Let’s start with payment stability. If you are renting then you probably have come to the understanding that your landlord/complex can raise your monthly rent payment due to inflation everytime your lease expires. To make matters worse for the renter, rent hikes aren’t always just due to inflation. The rental market is just like every other business and varies greatly depending on demand. According to the Dallas Morning News, North Texas rents have gone up 15% in just the last 5 years. And that makes perfect sense when you think of that time period in relation to the extreme economic downturn from which our nation is still recovering. If tons of people were foreclosed on or laid off about 7 years ago, then there was bound to be a huge demand for apartments in the years to follow, right?
On the flip side of this coin is the fixed-interest rate mortgage loan. If you were to buy a home and financed with a fixed-interest rate mortgage, then you would pay the same monthly principal and interest for the entire term of your loan; whether that is 30 years, 15 years, or somewhere in between. Not so coincidentally, now is a great time to embark on a mortgage loan with low loan rates being so prevalent.
Did we mention there are tax advantages to owning a home? We are not tax experts, but we can at the very least tell you that mortgage interest and property taxes are tax deductable. The deduction you can take due to your mortgage interest will be your biggest tax break. However that benefit is limited if your loan is for a million dollar home (or more). There are also deductions regarding energy efficiency and “points” (regarding the fees or charges you may have paid to obtain your mortgage loan), but, we would advise you to see a tax specialist to delve into those.
Another huge advantage to home ownership is the equity you build! What is equity, you ask? Equity is what builds when your home increases in value and you have started to pay off your mortgage loan. Bascially, it is the value of your home beyond what you still owe in mortgage payments. Once you’ve built equity, you can borrow against it in the form of a home equity loan to pay for a variety of things, think: home improvements, college tuition, or retirement planning. You can even use it as an opportunity to consolidate some bills or go on a vacation. There are many, many possibilities here.
Some other more intangible benefits include community stability. Buying a permanent place to live will help you and your family bond with neighbors, allow your children to have a consistent school environment and classmates, and can even make decorating a little easier; no more puttying old nail holes in the wall when you move!
Of course, with all of that being said, there are still plenty of times when home ownership may still not be right for you. Not sure you’ve found your perfect city? Think your job may relocate you? Do you want to wait until you have a spouse and children? All of these are legitimate reasons to wait.
But now that you know all of the benefits that come with owning a home, hopefully you will feel more confident in your decision when you are ready.