The decision of whether to rent or buy is a very complicated one. Once upon a time, the answer was obviously to buy. However, now there are many factors that you have to think about. Buying doesn't necessarily give you the value that it once did, and rents in certain areas are much more competitive. Therefore, to make this decision, you should consider both the standard factors and a few that you might have ignored.
What are the present mortgage rates? How long will they stay at that level? If you were to buy today and sell in a few years, what returns are you likely to get? These are the questions you have to think about when analyzing the present housing market. If you buy real estate today only for the interest rates to go up in two years, you might not be able to afford your mortgage anymore. If the value of your house doesn't appreciate, you could also sell it at a loss.
How Much Do You Need Upfront?
Both renting and buying a new home require upfront payments. Even if the house sounds very affordable, getting money upfront can be a difficult task. If you can't afford the deposit for a new home, renting might be your best option while you save up some cash. Speaking with a mortgage broker is a good way to assess what your options are and decide whether it's time to get serious about buying.
There are federal tax breaks that are available to homeowners and many cite this as one of the main benefits of buying. If you're paying a mortgage, you can deduct the interest you're paying on the mortgage from your income taxes. You may also not have to pay any tax for the first $250,000 in capital gains if the house was your primary residence.
The more of your mortgage you pay off, the greater the equity you own in your house. Home equity can be an important source of cash and you can take advantage of it in a number of ways. You can use the equity to get a line of credit if you need cash in a hurry and you can also boost your savings or get money to invest elsewhere if you're thinking about downsizing.
As a renter, you have the freedom of living in a house without worrying about major maintenance activities. You can also move with ease. Buying, on the other hand, allows you to improve your home and raise its value.
Speak with a local mortgage broker for more information.