Why renters should consider buying a home

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With the home prices down 35 percent since their 2006 peak and mortgage interest rates at record lows, purchasing a home may be more affordable than ever for first-time buyers. It also may be time for some renters to consider buying a place of their own. Whatever the situation, here are some guidelines to keep in mind when deciding between renting and buying.

When to buy or rent. Renters weighing whether buy a home should meet the following criteria: They should be committed to living in the same location for a few years, have a secure job and income, and have saved up enough money for a down payment.

Home prices have improved in some regions, but are still declining in many others. Some prospective buyers are still anxious about the continuing fall in home prices and are jumping into home ownership too early. Also, buying a home before you are financially ready can put a strain on your finances. When housing costs exceed 35 percent of gross income, you'll have to make unsustainable budget cuts to make house payments.

The reality is that everyone with a mortgage effectively pays rent, either to a landlord or to a bank, for the use of their money. Everyone also buys a house, either for the landlord or for themselves.

Advantages of homeownership. The chief benefit is building home equity by paying the mortgage down and, depending on the state of the economy, through appreciation in the value of the property. Of course, if you have an interest-only mortgage and your home value falls before you sell, you can lose equity.

Another benefit is that as an owner, you can remodel, paint, and make any changes that make a house your home. And for most people, owning a home means saving money on taxes because they can deduct mortgage interest and property taxes. Of course, these tax breaks can be offset by increased costs for maintenance, utilities, and insurance.

Disadvantages of homeownership include rising costs, responsibility for maintenance, and having to sell the property if you want to move or relocate.

Generally, owning a house makes sense for people who plan to stay put for several years, can afford the costs associated with homeownership, and can accept the responsibility for maintenance and upkeep.

Advantages of renting. Here are the chief benefits of renting a home:

The disadvantages of renting include no equity build-up, no tax savings, and being restricted in the kind of changes you make to a property. Generally, renting makes sense for people who expect to move in a few years, need flexibility, don't have the necessary cash to make a down payment, or lack secure employment.

Buying or renting: What costs more? When considering whether to rent or buy a home, run your numbers using a calculator like this. The decision involves more than comparing your rent to a mortgage payment.

Say your current rent is $1,200 per month. You are considering buying a home for $275,000. Assume you'll need at least $30,000 cash for the down payment and closing costs, so you'll get a mortgage for $247,500 at a 4 percent interest rate. The monthly payment for a mortgage, property taxes, and insurance will be about $1,600, which is $400 more than your current rent payment.

After taking into account the tax savings (due to mortgage interest and property tax deductions), the monthly mortgage payment, taxes, and insurance amount to roughly the same as the monthly rent. After the equity build-up from paying down the mortgage, over five years the total cost of owning the home is about $60,000, while the total cost of renting is about $75,000.

[Reversem]

Reverse mortgages are designed as financial assistance for people 62 years or older. The reverse mortgage works by allowing the homeowner access to the equity in their home without the issues of a monthly payment for the available funds.

http://www.reversemortgagelendersdirect.com/what-is-a-reverse-mortgage/
http://www.reversemortgagelendersdirect.com/how-does-a-reverse-mortgage-work/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-information/
http://www.reversemortgagelendersdirect.com/reverse-mortgage-calculator/

[nohater]

home ownership isn't all that great. sure you can deduct interest paid and property taxes but you don't get every penny of it back into your pocket. you have property taxes, fees voted by majority imposed on your property to pay for local parks or whatever, home insurance, maintenace costs to deal with and other worries that you wouldn't have as a renter. bad neighbor moves in next door, you just give notice to your landlord and move away. when you own a home you can be exposed to a bad neighbor(s) across the street, on either side of your home, behind your rear fence. when you buy a home, you cannot easily pick up and leave for whatever reason. renting gives you freedom, extreme flexibility. never buy a home as an investment as it is just silly to think the home will forever increase in value. bad neighbors, almost anything to the economy, can make the value of your home drop considerably.

[MegaProcrastination]

Home "ownership" is the biggest farce in this country (and this is speaking as a home owner) and one of the absolute worst investments there is unless you don't have to borrow money to buy it. They call it an investment when in reality it's nothing more than a huge money pit into which you toss countless thousands at the banks in interest payments, all the while building up your little bit of equity that will never be anywhere near the interest that was paid. The only ones benefited by mortgages are the banks lending the money.

[get_down]

Don't let a person with a realtor's agenda to convince you that it's better to purchase a home then rent. If indeed you're seriously considering be a home-owner, First of all, you need to know whether the property you picked is in a HOA's domain and if it does then make sure you are the type who can live under their rule/regulation...etc. what have not. Secondly, even if you have steady income which allows you to afford the mortgage payment, insurance and tax...etc., don't forget about the "maintenance cost" - I'm not just referring to the cost for structure repair and maintaining appearance...etc. I'm referring to various chores to maintain indoor and outdoor of your property. Case and point, 20 years ago, when my better-half decided to pick our current property which is about qtr of an acre, I expressed my doubt about the maintenance chores and she assured me that we'd share joint responsibilities of maintaining it. Well guess what, starting a few years back, it became my sole responsibility to conduct both indoor and outdoor chores - regularly mown the grass, get rid of the weed, clear the gutter, Thompson shield the deck, wash dishes, vacuum the carpet and knee-down while hand-pick the debris off the carpet...etc. Just saying it's a lot of work indeed once you own a home!

[cannuc]

Hah...doesn't the writer know that no matter how many years have past after you or him has paid off the Mortgage his house will never be "his" aslong as the city/state can issue a tax certificate and sell the home right from under him.Property taxes makes the city/state our defacto landlord. Ask anybody who pays 5.500K per year in property taxes. property taxes is just anotherway/another name for the state/city to charge rental for the use of a property that should be owned FREE & Clear.

[skeezix06]

You'll probably see me as one of those annoying goodie two shoes but I consider paying my share of taxes, federal, state, and local, to be pretty much patriotic. Property taxes usually help pay for schools. I have grandkids in school so I don't mind paying them either.

If you own your home, you have the ability to do things that you couldn't do in a rental. You can add a room or you can, after checking to make sure it won't weaken the structure, knock out a wall or change a dining room to a family room or a bedroom to a home office. You can put a greenhouse in the backyard or dig up ground for a garden. You can't do any of that if you're renting. If at the end of 20 years of house payments you only have to worry about $5,500 property taxes a year after retirement, that is much better than 20 years of rent with no end in sight and only retirement income to live on. You need to start thinking long term, not short term.

[vsmit]

Many home buyers who bought during the peak walked away because they could not make the mortgage payments (without a change in job or layoff) and their irresponsibility contributed greatly to the housing crisis. Only buy if you can and will make the payments. Have enough money to tide yourself over for a few months if you get laid off. Yes, my house is worth much less than what I paid for it, but I continue to make my payments. My personal responsibility.

[rwsmith29456]

And no balloon mortgages.

[jmgray16]

This also presumes you can find a bank to lend you money or a house in decent shape to buy. Where we live cash buyers are snapping up all the decent houses to rent out until prices go back up since we are 'near bottom', so you have to get lucky to not get stuck with a massive fixer upper that would take $50k plus to be a nice place to live. And it's really hard to know if you are going to stay in the same area in this economy. Layoffs still happen all the time and companies are folding. A lot of folks don't want to get saddled with a house since so many of the unemployed are stuck with a house and can't relocate to where the jobs are.

[twmat311]

Agree - those 1st 5 years in an existing home (if you can get into one) will show you what the previous owner was looking to avoid by selling. And isn't that $1600 4% mortgage (using the 33% affordability rule) pointing toward a $60K salary? Who are we speaking to here?
A recent Saturday business show on Fox (I know, I know...) had the panelists actually agreeing AGAINST home ownership, mainly because of having to be flexible and relocate with the job market - which will do wonders for community committment and tax bases.