To rent or to buy?
This is a question that most people will address at some point in their adult lives.
The question is actually very loaded because there are quite a few factors involved.
For instance: Renting
1. What are the rent rates in my area?
2. What is forecasted in rental market?
3. Are rentals hard to come by?
4. Do I have a backup plan if the landlord does not offer a renewal of the lease at the end of the lease period?
5. What if the owner decides to sell?
6. How much money is required for move-in?
a. Security deposits
b. Pet deposits
c. Application fees
d. First and last months rent (typically)
Then one needs to consider the tax ramifications of renting. Rent is generally not a tax deduction unless it's a place of business.
Please see IRS regulations here: Renting and Federal Taxes
Therefore, rent is a “hard cost” with not much payback.
1. How much of a down payment do I need?
a. Maybe not as much as you think…
2. What are the closing costs I might expect?
a. There may be ways to get assistance with closing costs
3. What credit score do I need to have?
a. Maybe not as high as you think…
4. What will my monthly payment be compared to renting?
a. Often times the same or lower.
5. What is my “actual cost” after taxes?
· Typically a home is considered a “forced savings account” because the house appreciates in value while a person is paying down the mortgage.
· In addition, currently mortgage interest can be used as a tax deduction for most owners.
· Currently, property taxes are a tax write off, mortgage insurance is a tax write off, and if you have a home office you may find even more tax write-offs!
So…your “actual” cost of purchasing at the end of the year is typically less than renting given a similar monthly payment – not to mention you have a place of your own, which can be lots more fun!
According to Trulia’s Chief Economist, Ralph McLaughlin, most homeowners experience greater gains in wealth than renters while also enjoying the peace of mind of a fixed monthly payment rather than wondering if rents will go up.
Renting or buying in Washington state: The current facts
· Due to a scarcity of properties to buy, home prices are predicted to continue to rise.
· Due to a scarcity of rental properties on the market, rents are predicted to rise.
· Mortgage interest rates are projected to rise according The Mortgage Bankers Association, the National Association of Realtors, Fannie Mae, and Freddie Mac.
The bottom line…for most folks, purchasing a home is more affordable than renting a home and now is a GREAT time to buy.
If you think now might be the time for you to purchase, or you would like to find out if it's the right time to purchase we would love an opportunity to answer your pressing questions and to help you find that perfect, affordable home to buy! Just shoot us an email and we will help you get started with your search.
Ron and Sherry Patterson