When, and if, you should buy a house is one of life’s biggest decisions. How do you know if it’s the right time to buy, or if you’re better off renting? Experts say it’s important to weigh a handful of factors as you decide.
“Home ownership has proven, over time, to be a good investment and less expensive than renting,” says St. Francisville broker Glenda Daniel of Daniel and Daniel Properties. “But there are important things to consider, like how long you plan to be in one place, and if you’re comfortable with the unexpected expenses that come with home ownership.”
Glenda, and her daughter-in-law Caitlin, also a realtor, help many first-time clients think through these issues. Often, younger buyers are trying to determine if they’re ready to commit to buying a house, or if they’re more comfortable renting until the time–and property–are exactly right.
“A lot of times these buyers are coming to us really informed about the process,” says Caitlin. “They’ve done a lot of thinking and fact-finding on their own before they walk through the door.”
When making your decision, it’s a good idea to consider the following factors:
How long do you expect to live in the home?
If you’re planning to be in a community for several years, buying might be your best bet. Renting is a better option for people who aren’t sure, or who know they’re likely to relocate in the near future. If you think you might sell your home within two years of purchasing,the increase in value will be subjected to capital gains taxes.
Could you use a tax break?
When you own a home and have a mortgage, you may be able to claim a tax deduction on the mortgage interest paid during any given tax year. In 2020 the IRS mortgage interest deduction allows homeowners to reduce their taxable income by the amount they've paid in mortgage interest during the year. Currently this rule can be applied to the first $750,000 of mortgage debt*. That’s an advantage that renters don’t have.
* Some limitations and exceptions apply. For complete details the IRS's Home Mortgage Interest Deduction rule can be found HERE.
Can you afford repairs?
When you rent, your landlord often takes care of your maintenance issues, including appliance repairs, carpentry, plumbing and electrical problems, and lawn maintenance. When you own, you must take responsibility for anything your property needs.
Do you need more time?
For some, it makes sense to take time before buying in order to build or improve a credit score, save for a down payment, or simply weigh what neighborhoods are most appealing. Or, if you’re employed in an industry lacking stability due to the COVID-19 pandemic, it’s wise to wait until you have improved job security before purchasing, despite the appeal of low interest rates. Renting gives you time to accomplish these objectives before taking the plunge.
Is owning part of your wealth-building strategy?
Most people eventually see owning a home as part of a long term wealth-building strategy. Buying a house is the single biggest investment you’ll make, and over time, it should increase in value. The equity you build in your home is like money in the bank. It gives you future buying power, or can be converted into another form of investment.
Is owning part of your American dream?
It’s an intangible factor, but owning a home can help you feel rooted. You build relationships with your neighbors. You take pride in your home’s appearance. You want to see your property increase in value. And through your property taxes, you support your community’s school system and other public amenities.
To explore your home buying options, click HERE to make an appointment with a BSF loan officer or call 225-635-6397.