Rent or buy? It can be a complex decision to
make.
Some people rent a home because they think that
they can't afford to buy one. Others like the flexibility that
comes with renting an apartment or house.
When you rent, you can live in a neighborhood
for as little or as long as you like. You're also free of maintenance
responsibilities. Your landlord handles repairs, for example.
But there are many good reasons to own a home.
You build equity! In the early years of a mortgage,
the majority of your monthly payments go toward paying the interest.
Over time, an increasing amount goes toward reducing the mortgage
balance, or "principal." The process of paying off a
loan over a set period of time is called "amortization."
As you make payments, you reduce the principal
and increase your share or "equity" in your home's value.
If your home increases in value through "appreciation"
- an increase in the value of a home - your equity builds even
faster.
Building equity - or savings - in your home is
important. For many people, it lets them plan for retirement,
pay for college and achieve other future goals.
You gain tax advantages! When you own a home,
you can deduct mortgage interest and property taxes from your
federal income taxes and some state income taxes. These deductions
can mean significant tax savings, especially in the early years
of the mortgage when interest makes up most of the payment. (You
may wish to consult a tax advisor for your individual situation.)
After calculating
your taxes, you might find that it's cheaper for you to buy than
rent! Keep in mind, however, that to gain these tax advantages,
you must file an annual income tax return with the U.S. government,
even if you're not a U.S. citizen.
You can rely on stable monthly payments! If you
choose a fixed-rate mortgage, you'll pay the same monthly principal
and interest for the entire term of your loan. (The payment can
go up slightly if your taxes and insurance costs go up.) Unlike
renting, your monthly payment will stay the same month after month,
even when inflation leads to higher prices.
You have a place for your family and relatives
to live in and gain a sense of community! When you own a home,
you can be secure in knowing that your family, and, if need be,
your relatives, will have a place to live. When you rent, you
might not always be able to renew your lease.
Owning also gives you an opportunity to get involved
in the well-being of your community. You may even feel a greater
sense of belonging.
Becoming a
homeowner
