“Buyers decide in the first eight seconds of seeing a home if they are interested in buying it. Get out of your car, walk in their shoes and see what they see within the first eight seconds.” – Barbara Corcoran

Buying a home is the most significant decision generally for families as is renting. The entire process is daunting. If you are a confident first time buyer then it becomes a life changing decision. It is a complicated process which is exhausting, exciting, fulfilling at the same time. Owning a home is not just a place to live, it is a means to create wealth as they say – ‘wealth buys wealth’. It is an asset building strategy. While, a few people think renting as a waste of money, and for those who cannot afford it. The idea is to rent it till you can buy comfortably since the apartment rents are at a rise in many cities. Home ownership is an option most people are looking into slowly and gradually. Buying a home requires cash investments, is an liquid asset as it cannot be sold immediately as you like and when you like.

Advantages of buying a home

1.   Home ownership builds wealth - Over a period of time, if people buy homes that are within the budget and affordable, their home ownership builds wealth. It offers stability and a safe environment.
2.   Building equity in your home – A study conducted by Federal Reserve, found that the average net worth of a homeowner is $194,000 which is 36 times greater than that of a renter as it is a forced savings. Home-ownership forces people to save stringently for the down payment and pay down the mortgage principal each month.
3. Reap mortgage tax benefits – As a homeowner, mortgage interest can be deducted from their tax obligation. However, talk to your financial planner on the best way to paying off the mortgage quickly as it is the best financial move you can make.
4. Housing payments will be stable - if you have fixed-rate mortgage only homeowners insurance (mandatory) and property taxes change.
5.  As an investment - Once you own the home you can use as an investment to generate income by renting it, instead of selling it.
6.  Settle in the community - Join community activities, volunteer for projects, know neighbors.
7.  You can decorate – Home ownership lets you enjoy the benefits of decorating to suit you taste and maintain it in a way that is your style.
8.   Origination fees on loan can be claimed – The year you buy your home, points can be claimed on loan, they are considerable savings.
9.    Real estate property taxes paid are fully deductible for income tax purpose on both primary residence and vacation home.
10.   Capital gains exclusion – this is something one qualifies for when you buy a home as primary residence and live in for two years. Up on selling, profit worth $250,000 if single and $500,000 if married and do not owe any capital gains taxes.
11. Buying is cheaper – Over time, interest of mortgage payment decreases, the interest you pay will be eventually lower than the housing payment while renting. On buying a home, you are paying rent to yourself instead of paying the landlord for the home.

Disadvantages of Renting a Home

Monthly payments can increase as the apartment rent or housing payment rises as the current lease ends. Even though you pay the rent or housing payment it is not your asset to sell when you move, they only provide shelter. As a renter you do not receive any tax benefits like the homeowners do. Homeowners can deduct mortgage interest payments and property taxes from their federal income tax, which in turn reduces the final cost of ownership. You do not own the house to remodel, upgrade an appliance or paint it without the approval of the homeowner.

Consider this

There are a number of things that need to be considered – advantages, disadvantages and financial situation. If you can answer these questions honestly then the decision becomes easy.

• Do you expect to live there all your life?

To recoup from the cost of buying and selling a home one must live in there for a minimum of five years to reap benefits thereafter. Let us look at the long term housing appreciation rate which is in the range of 3% - 5%, assuming 3% annual appreciation and closing cost at 12%, to break even you would need to own it for four years at the minimum. Holding period of 5+ years is usually advised. The holding period is the ownership period, so homeowners can rent it too, if they like. In case, the home owner is unable to hold ownership for that long, then there is a risk of losing money after closing in a down market.

• What is the cost of buying?

Over the period of 50 years since 1960 to 2013, the average price of homes has increased by 1465.5% while the average rent yearly has increased by 1190.6%, a difference of 279.4%. One thing to remember is with the rise and fall of the rates, at the end of 30 year period, home owners will have a home at no additional cost, no loans, just taxes and home repairs.

Those renting, need not worry about taxes and home repairs, just the home rent for the rest of the duration and sometimes worry about the increase in the monthly payment. Though renting is less expensive, however, when we consider in the long haul, when you are old and income decreases they would have to continue to pay the rent. 

• Do you have any future plans? What are they?

Personal and career oriented goals must be looked into. You may need to relocate for a better prospect. If you are single; you will be married and will start a family, you must consider investing in a property. In case there is a reduction in income, you must make sure the housing budget can be accommodated.If you are looking to retired,  The Villages, FL would be a great place to buy a home.

• Would you be able to get home finance?

In some cities, savings of $40,000 is required for a down payment which is generally about 20% of the purchase price plus 24 months of liquid sustenance which is about   would require more than $40,000, plus savings for a rainy day. Most of us cannot pay in cash and so choose mortgage as an option. Shop around and look for lenders and the amount you can borrow.

Conclusion

All of this points to one fact that buying is definitely an option one must consider. “Buying a home is one of the biggest investments some people will ever make" stated Fred Franks of Houses for Sale in Ocala FL located in Ocala, Florida. Buying a home is a decision of a lifetime, a dream that will come true and should not be taken lightly. It is a smart financial investment if you can afford it comfortably and are a long-term homeowner. Think of the benefit of buying instead of renting a home like decorating, styling and the financial benefits as it is worth the hassle when you see the money saved.