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Real Estate Guides Home Buyer's Guide Should you rent or buy?
Real Estate Guides Home Buyer's Guide Should you rent or buy?
Written by Administrator Monday, 26 November 2007 23:12
Choices, choices, choices...choosing whether to continue renting or to own your home seems like a huge choice. It's not when you really weigh the options. The most difficult part of buying is the affordability factor.
Does it Pay to Buy a Home or Simply to Rent?
If, like most first-time buyers, you are presently renting, it's easy to calculate your cost - simply, the monthly rent you pay. (Utilities, phone, cable, and other costs can be ignored in this comparison because they'll be approximately the same whether you rent or buy.)
But calculating the cost of homeownership is much more complicated, because income tax considerations affect your bottom line. And there is, in addition, the uncertainty about how much the value of your home will rise (or even fall) in the coming years.
As a tenant, you may be taking a standard deduction on your income tax return. This is the time to judge how that standard deduction stacks up against the amount you'd be able to subtract from income if, like most homeowners, you itemized deductions instead.
Once you itemize, you can deduct :
But calculating the cost of homeownership is much more complicated, because income tax considerations affect your bottom line. And there is, in addition, the uncertainty about how much the value of your home will rise (or even fall) in the coming years.
As a tenant, you may be taking a standard deduction on your income tax return. This is the time to judge how that standard deduction stacks up against the amount you'd be able to subtract from income if, like most homeowners, you itemized deductions instead.
Once you itemize, you can deduct :
 | Home mortgage interest; |
| All real estate taxes on any property you own; |
| Your state income taxes; |
| Charitable contributions; |
| Medical and dental expenses that exceed 7.5% of your income; |
| Personal property taxes if your state has them; and most important |
| Certain moving expenses |
At the start of a mortgage repayment schedule , when the debt hasn't been reduced yet, almost all of your monthly payment goes toward interest. A bit goes toward reducing principal (the amount borrowed), so that the next month you're borrowing a bit less, and owe a little less interest. That allows more of your next payment to go toward reducing principal. However, this process is very slow in the beginning and the interest portion remains high for many years.
Between the mortgage interest and the property tax deductions , you can figure that Uncle Sam is shouldering part of your monthly mortgage payment - 28% of it, in fact, if that's your tax bracket. Your state income tax bracket can also be added to that, before you calculate how much you save on income tax as a homeowner.
The Highlights of Home Ownership
| Credit - Owning a home helps you establish financial credibility. |
| Independence - Owning your own home provides you with independence and more privacy than renting. You are free to paint walls, plant flowers, keep pets and anything else within legal bounds. |
| Investment - As you make more payments and own more of your home, you add to its investment value. Most improvements you make will also add to its value. |
| Pride - A home reflects its owner's values and lifestyle. Owning a home can provide you with a source of pride, enjoyment and satisfaction. |
| Security - A home can provide security against inflation because the value of your home increases as prices go up. |
| Stability - Being established in a community provides a sense of belonging, stability and security. |
| Tax Advantages - Interest on your mortgage loan is deductible on your yearly personal income tax return. Many of the closing costs associated with purchasing your home are deductible, as are your property taxes. |
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In every transaction there is usually a request for repairs given to the seller by the buyer. The work order is usually backed up by a third party inspection report. The following is a list of some possible work orders. The work orders must be completed prior to closing and the seller is responsible for having them done. Check with your local authorities for specific requirements. 
A plan is something that most people over look when going into a new home purchase and if you don’t have one it could cost you lots and lots of money. A good REALTOR® will be able to help you with your plan. The biggest issue with your plan is TIME.