Realty Department

There are a lot of factors to consider when deciding whether to buy or rent. A financial advisor can help you determine which option is best for your specific situation.

Buying provides peace of mind, ownership and equity, while renting offers flexibility and less maintenance. The decision should be based on your financial position, lifestyle and future goals and plans.

Costs

The decision to buy or rent a home is complicated. It depends on your financial situation, affordability, lifestyle and future plans. The choice can also be influenced by local market conditions, home prices and mortgage rates.

A big drawback to buying is that you must pay closing fees, property taxes, mortgage insurance and maintenance costs. These expenses add up quickly, and can make owning a home significantly more expensive than renting. Besides these, the purchase of a home involves many other financial commitments and responsibilities that don’t come with renting. The good news is that the monthly cost of renting can take a lot less of a toll on your cash flow.

According to the U.S. Census Bureau’s Consumer Expenditure Survey, homeowners spend an average of $8,609 per year more than renters on total housing costs. These costs include mortgage payments, real estate taxes, property insurance, homeowner association fees, utilities and maintenance. In addition, a down payment is required to buy a home, which can be a significant financial burden.

The good news is that in some markets, it still makes more sense to buy a home than rent. Purchasing a home in Detroit, Philadelphia and Cleveland is cheaper than renting in those cities. However, the homeownership premium is highest in San Jose, where it’s more than double the cost of renting.

Another reason that renting may be a better option is that it offers more flexibility than buying a home. If you’re not sure how long you’ll live in the area, renting can help you avoid making a large financial commitment that may be difficult to reverse if your career changes direction. In addition, you’ll save on upfront costs and maintenance costs.

Buying a home does build equity, and it can be tax-deductible. However, the high cost of owning a home is a deterrent for many people. The cost of renting is lower, and it can leave room in your budget for other investments. Use a calculator to crunch numbers tailored to your specific situation and decide which option is best for you.

Taxes

When it comes to buying vs renting, taxes play a significant role. Homeowners pay property taxes, which are based on their home’s assessed value and used to fund local services. Renters don’t have to pay for these taxes because they’re included in their monthly rental payment. However, homeowners have the added benefit of being able to deduct their mortgage interest from their income taxes, which can add up to substantial savings.

Renters also pay utilities, which can add up to a significant cost over time. Depending on the landlord, utility bills may be included in the monthly rent or may be separate. In addition, rent increases can occur without notice, which can be a significant burden. Homeowners, on the other hand, can lock in a low mortgage rate for decades to come, which can save hundreds each month.

The housing market and availability of homes are another factor that can influence whether or not you buy vs. rent. If prices are high and mortgage rates are low, it makes more sense to buy, especially if you’re planning to stay in the area long-term.

If you’re considering purchasing a home in Corpus Christi, now is an excellent time to act. Mortgage rates are at historic lows, and locking in a competitive rate could save you thousands over the life of your loan. Moreover, real estate depreciates over time, which can further reduce your tax bill. However, it’s important to consult a tax professional for personal income-tax advice. They can help you determine which option is best for your unique situation.

Equity

Homeownership is a great opportunity to build equity. As you pay down your mortgage, the property’s value increases and you build equity that can be used to finance future expenses. However, renting doesn’t offer the potential to grow wealth through accumulated equity because rent money is not invested into your own property.

Buying and renting are decisions that should be based on many factors, including your financial situation, lifestyle, work status and your readiness to settle down for the long haul. Cost is a major factor, but so is the state of the housing market and the economy, which can impact home prices, current interest rates and the availability of homes for sale or rental.

If you’re interested in learning more about the benefits of homeownership, Travis Credit Union’s Home Loan Team is happy to help you evaluate your options and make a decision that best fits your goals. We’ll also take the time to review your financial picture and help you understand how the process works from start to finish. Contact us today to get started. And don’t forget to take our Financial Wellness Assessment so we can help you determine the most appropriate path for your personal financial journey. The sooner you start, the faster you can reach your housing goals. Good luck!

Maintenance

The maintenance associated with renting can include a higher risk of costly repairs and noisy neighbors. On the other hand, owning a home or apartment can come with its own set of maintenance issues, including property taxes and insurance costs. In addition, homeowners may pay additional fees for homeowner’s association dues and utilities.

It’s important to factor in the potential for future increases in your monthly rent, home owner’s association fees and mortgage payments into your financial model. Assuming that you know what the cost of these extra expenses will be in advance, you should compare this cash flow (monthly payments plus extra expenses) to your opportunity cost of investing this amount in other assets that can provide returns.

You should also take into account the state of the housing market and your current housing availability. If prices are high and going up, it might be more financially beneficial to buy a property now than to wait and rent in the future.