The Advantages of Buying versus Renting.
There are several advantages of buying your home. This is a big decision that shouldn’t be entered into lightly, but you shouldn’t let fear prevent you from making a decision either. Our goal is to provide you with all the information you need to make the most informed decision possible. Below is a list of advantages you can expect when you buy your own home.
Financial Benefits:
Owning a Home Builds Equity and Forces You to Save:
When you purchase a home the cost of the home is fixed and so is your monthly payment. Each month you make a payment a portion of that payment goes to pay down the principal you owe on the home.
See the table below. It describes the interest and principal paid on a $250,000 loan at 6.5% interest in year 1. Notice at the end of the first year, you would have paid down $2,794 of interest of your loan. In other words, you bought your home for $250,000 and at the end of the first year you owe only $247,206.
| Year | Month | Interest Paid | Principal Paid | Balance |
| 1.00 | 1 | 1354.17 | 226.00 | 249774.00 |
| 1.00 | 2 | 1352.94 | 227.23 | 249546.77 |
| 1.00 | 3 | 1351.71 | 228.46 | 249318.31 |
| 1.00 | 4 | 1350.47 | 229.70 | 249088.61 |
| 1.00 | 5 | 1349.23 | 230.94 | 248857.67 |
| 1.00 | 6 | 1347.98 | 232.19 | 248625.48 |
| 1.00 | 7 | 1346.72 | 233.45 | 248392.04 |
| 1.00 | 8 | 1345.46 | 234.71 | 248157.32 |
| 1.00 | 9 | 1344.19 | 235.98 | 247921.34 |
| 1.00 | 10 | 1342.91 | 237.26 | 247684.07 |
| 1.00 | 11 | 1341.62 | 238.55 | 247445.53 |
| 1.00 | 12 | 1340.33 | 239.84 | 247205.69 |
| | | Total end of Year One | 2794 | |
At the same time you’re paying down the principal on the loan, your home is appreciating (or increasing in value). Typical, conservative appreciation rates are around 2% per year. So lets break down what your home is worth at the end of year one.
$250,000x2% = $5,000
Your home is worth $255,000 at the end of year one and you owe $247,206. Your equity (the amount your home is worth minus the amount you owe) is $255,000 - $247,206 = $7,794 Owning your home forced you to save $7,794 in the first year alone! Compare that to renting.
Tax Savings
When you own a home you are able to itemize your taxes. You are able to take more deductions and lower your overall tax burden.
Looking at the example above, at the end of year one, you would have paid $16,168 in interest on your home loan. Depending on your income bracket, this amount of money could be used to lower your taxes. So, if you’re making $50,000 of income you may only get taxed on $45,000, allowing you to keep more of the money you earn.
Non-Financial Benefits:
There’s more to owning your own home than just the financial benefits. Having a place to call your own gives you an increased sense of stability (you know you’ll be there for a long time) and security knowing a landlord can’t sell your home or rent it to someone else. It’s your place to do with what you will, paint, re-decorate, plant a garden etc. It’s a piece of the American dream.
Content by Astonish