SPECIAL REPORT FOR RENTERS
Chart of Pros vs. Cons of Home Ownership vs. Renting
Reason 1: Why rent? There is only one reason why renting makes sense. In most cases, I will argue for purchasing a home and I will try to prove my point in this article. First, the only reason where renting makes sense is;
- Moving to a new area or near future relation plans - transition. Sometimes people are transferred to another city, state or country and know nothing about the area. This is a circumstance in which renting makes sense due to either time tables of moving from or simply getting used to new surroundings. It allows you to gain a familiarity of the locale and surroundings and provides a springing board upon which you can intelligently purchase property to suit your needs.
Now I will address the reasons why renting does not make sense for most individuals. I will address this issue in a question or assumption and answer format for ease of understanding.
Assumption 1: I lack the knowledge, skills or resources to be able to acquire property in this expensive over-priced market.
First, let me address this question in multiple parts. While understanding what goes into purchasing and selling real estate is mildly complicated, getting the answers to your questions are actually right here at your finger tips. Today, the internet and other technologies is making access to information readily accessible. You have more access to information today than you did yesterday. Real estate professionals, like myself, are available to be contacted for your questions very easily. Understanding the process of buying or selling homes is even available on my web site. Getting the financing is the second part to the complicated process. Loan officers understand the many programs available to get you into a home without the "typical" down payment that many think is needed.
Assumption 2: I can't afford to buy a home today because homes are too expensive.
I have to reverse that logic. You can not afford not to! Home prices have consistently gone up for hundreds of years. Over time, prices of homes will always be favorable and appreciate in value. Of course, this is provided the properties are maintained well. Yet, as the prices of homes go upward, your chance of getting a mortgage payment more suited to your income decreases. Lets say you purchased a home in 1995 for $100,000 with a mortgage payment of $762.00. That same home today is now worth $145,000 with the same mortgage payment and tax benefits you had back in 1995! That's ($145,000 - $100,000) $45,000 of cash your home has made you. Now if you subtract out tax benefits it saves from your income, you will note that you are probably living for free. In fact, you probably get paid to own a home in some cases! As prices of property go up, so does rent in most cases. If you have been renting a home since 1995, you probably have seen your rent go up with no tax benefit or money in your pocket. You work hard for your money! There are hundreds of creative ways mortgage financing is accomplished. If you have a job, there is always a way to find a loan suited for your situation. I can explain this concept in more detail for you. Lets get started and improve your situation now!
Quote from Alan Greenspan, Chairman of the Federal Reserve
Greenspan chairs the Federal Reserve, an independent federal agency that both oversees most banks and strongly influences interest rates. A Greenspan comment can easily cause the Dow Jones average to rise or fall several hundred points, depending on what the good chairman says.
"While home prices do on occasion decline," said Greenspan in a speech to a community banking group, "large declines are rare; the general experience of homeowners is a modest, but persistent, rise in home values that is perceived to be largely permanent. This experience contrasts markedly from volatile and often-ephemeral gains in stock market wealth."
Assumption 3: I can't by a home because my credit is less than perfect due to any reason from bankruptcy, slow or missed payments or just getting started with no credit at all.
Credit is rated on the A, B, C and D rating. Fortunately, Summit Financial Mortgage services all types of credit situations. They can get you an approval on a loan other companies would laugh at. Individuals with a lower credit score often pay a little higher interest rate, but guess what Summit Financial Mortgage offers free refinancing. So what we would do is get you into a home and refinance for free after your credit score rises to the A or B rating which would lower your interest rate. the interest you pay on a mortgage is tax deductible, saving you hundreds to thousands of dollars on your taxes.
The only way to find the answer to the question of, "can I afford to buy a home," is for us to talk. You would be surprised what we can make happen for you!
Assumption 4: I can't afford a down payment right now.
Lets look at the example in assumption number one where we bought a home in 1995 for $100,000. Most people have a hard time coming up with 5% or even 10% of $100,000 let alone 5-10% of the value of that same home today being $145,000. The down payment in 1995 for that home was $10,000 and today it is $14,500. This alone stops most people from getting into a home. While you are saving for that big down payment, home prices keep going up and up taking you longer time to reach that down payment goal. The time is now. You can not afford to wait for your down payment to catch up with the 10% rule. You must find a lender that will get you into the home, even if its at a higher interest rate at 3% or less down. In fact, FHA has programs for 3% down to get into a home! Now is the time to act. The longer you wait to save for that down payment, the harder it becomes to reach that goal. Summit Financial Mortgage offers 100% financing on home purchases, new or existing construction. As in assumption number three, you can refinance into a lower rate loan at a later time. Lets get you into a home now to make your dream a reality.
Look below in the chart to compare the pros or the cons of home ownership vs. renting.
Advantages of Renting
- Usually costs less than buying.
- You can usually move more easily.
- Little responsibility for maintenance.
- No responsibility for repairs.
Disadvantages of Renting
- No tax benefit.
- No investment in or from the property.
- No equity is building.
- Rent payment can increase frequently.
- Possibility of eviction.
Advantages of Buying
- Greater stability.
- Usually good investment.
- Your equity builds.
- First home often leads to better home.
- Greater individuality in decor.
- Greater choice in space arrangement.
- Greater sense of security.
- Often fulfills the American dream.
Disadvantages of Buying
- You are responsible for property taxes.
- You are responsible for maintenance.
- You are responsible for repairs.
- Possibility of foreclosure.
- In foreclosure, loss of equity.
- Monthly housing usually costs more.
- Your cash is tied up.
- You can't usually sell a house quickly.
- You have less mobility than renting.
- Payment on some mortgage types can increase.