Why It’s Smart for Renters to Pursue Home Ownership

For a first-time homebuyer, buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of owning a home are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of financial stability, potential tax advantages and pride of ownership.


Yes, there are certain responsibilities involved with owning a home. Landlords will often argue the benefits of renting, but if you are renting you’re helping them make their monthly mortgage payment.


The numbers are astounding if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase at least 5% each year, then over the next five years you will pay your landlord $66,309. If you are currently renting a home, you may be paying much more than that each month. Either way, you gain no equity by forking over this monthly housing expense and you certainly won’t benefit when the property value increases!


However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan, you can have the piece of mind knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future if the interest rates go down, and that in turn would cause your monthly mortgage payment to go down.


In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan options, and pass along this information to your tax advisor to glean feedback on your behalf.


To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with your credit score, will determine how much house you can afford and what your interest rate will be. It is also important to let your mortgage consultant know what your possible future goals are, because this will help narrow down which loan option is the best for your long-term needs.

Housing is an expense that takes a large portion of your monthly budget. However, if you are a renter and feel that your house should be more than just a place to keep your belongings, think about the advantages of purchasing real estate. It may be time to take the step towards owning a home and increasing your personal net worth at the same time.

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