That old question deserves a new look….not that there is much change in the answer though. Here are some thoughts and stats that might help. With the trend in home prices increasing the thought begs asking, ” do I rent and wait out the market or jump in and buy?”. With mortgage rates still at all time lows, combined with the tax advantages of home ownership – which so far are still protected – this is an excellent time to turn your dream of owning a home into reality. So the next question is, “can I afford to buy?”.
Does it cost me more to rent? No matter what you are currently paying for rent, your total cash outlay over a period of several years will add up to a higher total than you may have realized. The following chart shows what your rent payments would add up to with an appreciated 5% interest rate of investment. On average for the past 10 years our home values experienced an average 10% increase in value per year. This year in many cities of San Mateo and Santa Clara County our property values increased as high as 25%. Although not always a reality it does beg the question, “why would I not want to own a home when it provides a permanent roof over my head and returns a rate of appreciation that high?”.
With the money you are currently spending on rent,you could be building equity in your home. Keep in mind, too, that over the years your income most likely
will increase faster than any increase in your mortgage payment. Rent payments, on the other hand, tend to increase – right along with your paycheck. Ask your loan officer or mortgage broker for financial plans that are available to you.
Homeowner Tax Advantages
When you’re figuring out how much you can afford to commit to monthly mortgage payments, don’t forget the tax advantages of homeownership. Both property taxes and interest payments on a mortgage for an owner-occupied home are currently tax-deductible. In the early years of a typical mortgage, all but a small percentage of each monthly payment is used to pay off the interest on the loan. This means that as a homeowner, your annual taxable income could be
substantially reduced by deducting the payments you make on property taxes and yearly mortgage interest. Ask your CPA (certified public accountant), attorney, or tax preparer how buying a home now would affect your tax situation.
Home Value Appreciation
In addition to tax advantages, you can also benefit from any increase in the value of your home through appreciation and improvements you add for your own comfort and enjoyment.
You Can Make Home Ownership a Reality
Take a good look at your personal financial situation in comparison to housing price trends and mortgage plans available in your community. You will probably discover that you are closer to homeownership than you had realized. Buying a home is probably one of the biggest investments you’ll ever make. And when it’s your first home, it is especially important that you seek qualified assistance. Call me I’ll find and help you purchase – the home of your dreams!
Here is a link to a chart that the NY Times recently published that actually plots the financial advantages. It’s easy and absolutely right on the money!