The Benefits of Buying a Home Versus Renting
Owning your own home has been an essential component of the American dream since its inception, but renters in Austin still ask the question, “What are the benefits of buying versus renting?” Certainly, renters enjoy some benefits, like not having to perform maintenance (other than basic upkeep and changing the air filters) and being able to change location at the end of their lease easily. Still, many renters say that their preference would be to put down roots and own their home. The flexibility of renting is often convenient, but the long-term benefits of owning the home ultimately tend to win this battle.
The Main Benefits of Homeownership
You are able to put down roots. When you own a home, you have a more significant investment in the community. If you don’t own the house, it is harder to connect with the neighborhood and truly feel like you are a part of it. Once you have purchased your property, you will likely take more pride in your home; it’s appearance and the neighborhood overall. You will probably connect with your neighbors and may seek to make long-term bonds with the others who also have invested in the community. Homeowners often feel a great sense of pride and community in their homes and neighborhood.
Homeownership is an investment in your future. As you pay off your mortgage and increase the equity in your home, you will find that your home is a “live-in” savings account. Over the lifetime of living in the house, you will be able to build wealth, and if it comes time to sell the home, you will be able to realize it’s real financial value.
Homeownership has tax advantages. For many people, the tax benefits associated with homeownership is reason enough for them to make the plunge. Homeowners are allowed to deduct their mortgage interest on their federal tax returns, as well as closing costs and property taxes. These savings can add up to thousands of dollars each year (especially in the beginning years when your mortgage payments are at their highest) that can be extremely beneficial.
Budget stability. Most renters have experienced the routine rent-hikes that seem to occur on a yearly basis. In Austin, especially, the cost of rent has soared in the past decade and renting is an increasingly expensive proposition. If you purchase a home with a fixed-rate mortgage, you can stabilize your budget, knowing that this payment will not change for the 15 or 30-year term of the loan.
Over time, buying is cheaper than renting. While your mortgage payment may be more than you pay in rent right now, over time with the changing rent prices, you may ultimately save money by buying a home. When you factor in the tax benefits, owning your home is usually cheaper in the long run than renting. Because the value of real estate tends to increase over time, the house that you purchased will likely be worth much more later on than it was when you first bought it!
Ready to Buy?
As a renter, you are used to the standard costs that are involved from the moment you find your place to the moment you move out of it: the application fee, the security deposit, the first month’s rent, the optional pet deposit, the monthly rent, the renters insurance, and the utilities. Buying a home is a different process and involves other fees. When you are ready to purchase a home, be sure to talk to your agent about:
- Earnest Money: You the homeowner would pay the seller this deposit, which is placed in an escrow account
- Down Payment: This is also a certain percentage of the purchase price.
- Home Appraisal Fee: This must be paid before your home loan is approved.
- Property Taxes: You must pay the seller upfront for the taxes they paid between the closing date and the end of the current tax period.
- Homeowners Insurance: Paying the first year’s insurance early may be required by lenders.
- Flood Insurance: Depending on where you live and if you live in the floodplain, you may be required to purchase flood insurance along with homeowners insurance (the latter does not include the former).
The following are the recurring costs that factor into owning a home:
- Loan Payments: These, which vary depending on factors such as what kind of mortgage you have, are included in your monthly escrow payment.
- Property Taxes: These, included in your monthly escrow payment, vary according to time and location.
- Homeowners Insurance: This is also included in your monthly escrow payment.
- Private Mortgage Insurance: This is required if your lender is private and if you only paid a certain percentage of your purchase price upfront.
- Utilities: These include internet, cable, water, electric, gas, and trash.
- Repairs & Upkeep: These may not be monthly recurring payments, but they are costs that will come up during your tenure as a homeowner. This includes painting and other home renovations, mowing your lawn, tending to your garden, and paying professionals to fix anything in your home that you cannot fix yourself.
Your Wants and Needs
The price of a home and all associated costs are only one part of home ownership. You must also consider the house itself: its appearance, its location, and its inhabitants — you and your loved ones. Consider your current wants and your current and future needs, factoring in marital status, family size, the number of children expected to live in the home, and the number of pets.
Are you single? Do you have a partner? Do you have a child or children, or are you currently expecting, or do you want children within the next few years? What do you value? These questions will help you determine your home size and location wants and needs. For example, if you have children, the school district and school a home is zoned to will factor into your decision making. Do you have an ailing parent that you would like to live closer to? A nearby neighborhood may be where you begin looking for a home. Would you prefer to have a short work commute? Seeking out a home that is an hour away from your office may not be the ideal route.
Once you have considered all of the things that matter to you and your family, discuss them with an agent that you trust. At Domain Realty Austin, our experienced Austin real estate agents are ready to help you leap from renting to owning your own home. We will help you find the perfect home that fits your needs and your budget, so why wait any longer? Contact us at (512) 872-4211 to talk to a member of our team and get started on your home search today!