buying a home

Homes: Rent or Buy?

Before the bubble burst, buying a house was almost always smarter than renting. Is that still the right choice?

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Rent or Buy: What Works Best for You?

Rent or Buy: What Works Best for You?Millions of Americans have received foreclosure notices over the past few years, forcing many former homeowners into the rental market. The increase of renters (many of whom used to be owners) has driven up rental rates in many areas, making the once easy to calculate formula of renting versus buying a little more difficult.

When deciding if renting is a better option than buying it’s best to compare the numbers on a long-term scale. First list the expenses you will have to pay when buying a home.

Costs buyers have to pay include:

  • Down payment
  • Closing costs
  • Monthly mortgage payment (principal/interest)
  • Property taxes
  • Homeowner’s Insurance
  • Association fees
  • Utilities
  • Renovations
  • Maintenance

Fees associated with renting include:

  • Initial rent deposit
  • Rent
  • Utilities (some utilities may be paid by property owner)

Renting v. Buying: Benefits

The list of yearly and monthly fees associated with renting may lead many to believe that renting is significantly cheaper than buying. However, while renting may serve as a good temporary option, buying a home is a better financial decision because the cumulative amount of money spent over the years could pay off your principal instead of adding equity for your landlord. You will also build equity in your home and earn the option to refinance to make home improvements or simply have extra cash in your pocket.

In today’s current economic climate, your long-term and short-term goals most likely include saving money. By renting, you have a roof over your head but you are prolonging the financial freedom and benefits of owning a home that many Americans enjoy everyday.

Some of the benefits of owning a home include:

  • Tax Deductions – mortgage interest and property tax obligations are fully deductible for both federal and state income taxes. Additionally, many closing cost and fees for your loan application and appraisal may be deductible immediately or when you decide to sell your home. Also if you have a home office, your cable and phone bill can also be deducted.
  • Equity – Equity is the portion of property you actually own. Needless to say, you can’t build equity as a renter. Moreover, there is a new trend in home owning called equity builders. This group of innovative homeowners picks a short-term home loan (usually a 5- or 7-year ARM) and adds money to their monthly payment to decrease the principal balance at a faster pace. Equity builders shorten the length of their home loan, lock in low-interest rates, and own their home faster.
  • Option to Borrow – Equity can be used to secure a loan or obtain a line of credit. Your increased buying power can lead to home improvements or even the purchase of an investment property, expanding your portfolio of assets.
  • Appreciation – While it’s hard to imagine right now, current record low home prices means you’re likely to sell your home in the future for more than what you paid for it today. For example, Harvard University’s Joint Center for Housing Studies suggests that a buyer who makes a 10 percent cash down payment with an annual home appreciation rate of 5 percent could expect a 225 percent return on the cash after five years and a 623 percent return on the cash after 10 years.
  • Freedom – Renters typically renew their lease every year. This gives landlords the freedom to increase rent from year to year if they want to. Buyers have exponentially more freedom to do everything from permanent décor decisions to locking in on low mortgage and interest rate prices.

The decision to rent or buy a home should be made with long-term goals in mind. If you’re considering renting because of a foreclosure on your credit record, understand that renting is a temporary option that should be used as you repair your credit. Renting offers an alternative for people who are not yet in a position to buy. If you use this alternative as a time to save, repair your credit, and position yourself for the future, the American dream of homeownership will be an attainable goal for you.

Everyone’s financial situation is different, and whether to buy a home or rent a home is not a one size fits all equation. If you’re still not sure whether buying a home or renting a home is best for you, talk to us. We’ll help you draw out comparisons that will include your specific financial situation.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Buying is Cheaper Than Renting in Most U.S. Cities

Home prices have taken such a beating and demand for rental units has increased so much that it’s now cheaper to buy a two-bedroom home than to rent one in most major U.S. cities.

According to real estate web site Trulia, buying was cheaper than renting in 74% of the country’s 50 largest cities in July. In just 12% of the cities, renting was cheaper. In the remaining 14% of cities, renting was less expensive but close to the cost of buying.

Factor in rock bottom interest rates and the tax perks of owning a home, and for those who can afford it, it certainly is a buyer’s market.

Should you rent or buy?

The buy-rent calculation is just one part of the decision-making process. Other factors include:

  • How long you plan to stay. If you’re not keeping the home for several years, transactional costs of buying and selling (e.g; commissions, closing costs) can wipe out any buying edge.
  • Whether you have cash for closing. It’s not easy to find banks willing to lend more than 80% of the cost of a home. That means buyers have to come up with 20% down, plus closing costs. On a $200,000 home, that’s $40,000.
  • Whether you can cover all the homeownership costs. It’s not just the mortgage: There are property taxes, insurance, heat, utilities and regular maintenance.
  • Whether you can claim the tax advantages of homeownership. Mortgage interest is deductible and can shave a lot off tax bills but this benefit accrues mostly to high income earners with substantial mortgage payments. Many borrowers claim the standard deduction on their taxes and so derive no savings from the deduction.

Even where it’s cheaper to rent, it doesn’t necessarily mean renters will come out ahead. Depending on where they live, renters may save on monthly expenses but, unlike the forced savings of mortgage payments, they won’t have anything to show for their monthly payments in the way of savings.

Ultimately, however, the decision whether to buy or rent depends on each person’s situation and their plans for the future.

Talk to us about the rent vs. buy calculations for your particular situation. We’ll help you determine which is right for you.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

5 Reasons To Buy A Home

Recent events in the housing market have many people questioning if home ownership is still something to aim for. Even as the nation continues to recover from the economic downturn, the benefits of purchasing a home of your own remain as strong as ever.

1. Good Investment

Renters receive no return on what they pay out in monthly rent – it’s virtually money out the window. Even though renters are paying for living space, committing to a home purchase and monthly mortgage creates much more potential for a return on the investment. As you pay your mortgage each month, you are building equity and increasing your net worth. Equity is the value of the property that you own or what you have paid off each month. A home’s equity is also combined with the amount of appreciation, or amount your home has increased in value over time.

Building up your home’s equity also opens the door to mortgage refinancing and home equity loans.

Homeowners then have more financial flexibility towards financing large expenses such as remodeling, college tuition or debt consolidation. Of course it’s always possible that the value of your property will go down and not up, as many homeowners throughout the country have experienced over the past few years. Still, if you look at the value of real estate over the long term it has gone up over time. Like any investment buying a home involves risk – research the real estate market in your area to help you make a decision that feels right for you.

2. Tax Benefits

As you diligently pay your monthly mortgage, your tax advantage increases over the years. When you are paying for your own home you have the ability make a deduction on your federal income tax return for what you have paid towards the interest on the mortgage and property taxes. Some states also make allowances for additional deductions. It pays to check with your accountant or tax advisor in regard to your allowable state deductions.

3. Financial Control

Paying for a home of your own prevents you from being subjected to surprise rent increases, especially if you have chosen a fixed rate mortgage. It also removes the stress of lease renewal. For many, becoming a homeowner is a solution for beating the high cost of retirement. It is entirely possible to pay off your home and live out your retirement years rent-free! Of course, as long as you own the home you will be responsible for the property taxes and insurance costs.

4. Freedom

Let’s face it, renting is fine for many, however, there usually comes a time when you want to call the shots and be in control of your personal space. Most rental situations dictate everything from paint colors to pets to window treatments. Forget about remodeling or making home improvements, and why would you want to invest time and money in to a place that is not even yours? As a homeowner you can also resolve issues on your own, such as home repair and maintenance. Owning a home of your own allows for personal expression and control.

5. Pride of Ownership

There is a great deal of satisfaction that comes from buying a house. It is an experience that provides independence and privacy. Because it is typically the largest single investment that most of us will ever make, it remains an achievement to be proud of.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Home Buying Negotiating Tips

When it comes to buying a home, the ability and willingness to negotiate is a must for both the buyer and seller. In general, sellers ask for more than they are actually willing to accept and buyers offer less than they are willing to pay. The trick is to find the perfect balance so you, as a buyer, feel good about the purchase price without leaving the seller feeling insulted.

Real estate is a business that either favors the buyer or seller, hence the terms buyer’s market and seller’s market. When negotiating a purchase price, it’s important to know which of the two you are in. As the buyer, you will have the best chance at a successful negotiation if you research the price of other comparable homes in the area before making an offer.

Not every offer is accepted, so don’t be disheartened if your first offer isn’t a winner. In some cases, the seller will make a counteroffer for your consideration. Have you ever heard the old saying, “never take the first offer?” The same is true in real estate, and almost every seller knows it. Your first offer is likely to be less than you are actually willing to pay, which leaves you some bargaining room.

There are a number of reasons why a seller may choose to reject an offer, including a feeling that the offer was just too low, the house is newly listed on the market or another offer may be higher than the one you made. In some cases, sellers may also reject an offer that includes owner financing or other requests that are impossible to meet. One example may be an offer that requires the house be available within a certain amount of time. Most contracts require that the seller move out within 30 days, but anything less would require negotiation.

Before you sign anything relating to a real estate transaction, make sure you read over every detail of the agreement. If you have any questions, ask your real estate agent. After all, real estate is their business and they are there to help you through every step.

Tags: , , ,

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

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