As you get older, you’ll start to notice everyone around you starting to check all the “boxes”, i.e. finding a partner, settling down with a career, and buying a home. It’s easy to assume dreams of homeownership are unattainable to you for a variety of reasons. Whether it is heaps of student loan debt, hesitancy to commit, or simply a lack of the right resources at hand, these hurdles can feel overwhelming at times, but the longer you wait, the longer you’re putting off the plethora of benefits that come with long-term decision making.
It’s time to take this dream of homeownership off the backburner and make moves, both figuratively and literally.
1. YOUR RENT WILL ONLY CONTINUE TO RISE
It probably doesn’t come as a surprise that rental prices are on the rise across the nation. The average rent for a one-bedroom apartment hiked 4.2% in 2018 and studio apartments rose 5%, according to The Apartment Guide 2019 Annual Rent Report. A sales associate with ReMax, Bill Golden, shares, “If you’ve seen your rent escalate significantly but you feel trapped renting, it means the balance may be tipping toward buying. With today’s escalating rental rates and low (mortgage) interest rates, chances are your monthly outlay could be less on a purchase than on a rental.” While continuously tossing money at your landlord for your rental unit, it makes it nearly impossible to save towards your goals. In order to start investing in your future and build equity, you have to take the plunge into homeownership.
2. AVERAGE HOME PRICES ARE PREDICTED TO RISE BY $9,000 THIS YEAR
Home prices tend to increase over time, but NAR expects the median price of existing homes to increase by 3% in 2020. That brings the nation’s average home of $269,600 up to $278,599. Senior economist over at NAR, Gay Cororaton, predicts this based on historical data going as far back as 1999. She explains that this shows the “average month-over-month change in median existing-home sales price changes throughout the year.” Keep this in mind while you balance the pros and cons of homeownership — if you wait until next year, you’re likely to pay more.
“IF YOU’VE SEEN YOUR RENT ESCALATE SIGNIFICANTLY BUT YOU FEEL TRAPPED RENTING, IT MEANS THE BALANCE MAY BE TIPPING TOWARD BUYING.”
3. BUILD WEALTH
Owning a home is one of the biggest steps you can take towards increasing your net worth and building your equity. Many factors over time will help contribute to your home equity, such as the value of your home rising, renovations made both to the interior and exterior, and making your monthly mortgage payments on time. Rather than handing off all of your monthly housing costs to a landlord, you will now be saving a portion each month considering your newly forced savings. The equity you build can assist you in the future, whether it be for retirement, saving for your children, or the possibility of moving into a larger home or even purchasing an additional home.
4. SECURITY AND FREEDOM
Being a homeowner offers a great sense of security as well as freedom. You’re welcome to paint your walls as you please and let your furry friends roam wherever they’d like, without any pricey pet deposit. The days of waiting for your landlord’s approval on something as trivial as a new doorknob are over when you own your own home. You want to feel comfortable and safe in your house, considering throughout our lives we spend 33 years in our beds! The elimination of inspections, neighbor’s loud week-day parties keeping you up, and the overall lack of control in your building will allow you to feel more at ease in your own home; your safe place. The idea of having to move is an immensely stressful concept, in fact it often makes the list of the top 3 most stressful events in one’s life. The comfort of settling into your home provides stability and most likely means you won’t be moving anytime soon, so get comfortable — you’re finally here to stay!
5. TAX BREAKS
After the slew of expenses that come along with purchasing a home, it’s nice to know there are benefits coming your way. One huge benefit being tax breaks. Both the interest and property tax portion of your mortgage is a tax deduction. As long as the balance of your mortgage is less than the total price of your home, the interest is 100% deductible on your tax return. Considering your interest is the biggest chunk of change when it comes to your mortgage, this is a gigantic relief. In addition to mortgage interest, homebuyers also receive a tax break when it comes to property tax, especially first-time homebuyers. Real estate property taxes paid for your first home, as well as a vacation home if you’re so lucky, are deductible for income tax purposes. You can find more information on tax breaks for first-time homebuyers in IRS Publication 530.
6. YOU WON’T ALWAYS HAVE A MONTHLY PAYMENT
If you’ve been a lifelong renter, this may sound like a foreign concept, but believe it or not, one day you won’t have a monthly housing payment. Unlike renting, you will eventually pay off your mortgage and your monthly payments will be funding other (possibly more fun) things. Even if your mortgage payments are a bit steep, there is a light at the end of the tunnel. Each of your mortgage payments are knocking down the price of your home, and you can even use the equity to fund your next house. While you do have property taxes to keep in mind, these are typically paid quarterly making it much easier to budget and far less of a headache.
7. PREDICTABLE COSTS
As a homeowner, your monthly costs are most likely based on a fixed-rate mortgage, which allows you to budget your finances over a long period of time, unlike the unpredictability of renting. Especially if you’re living in an up and coming neighborhood, you don’t have to wake up in fear of being shooed out of your neighborhood by a big real estate company buying your building and raising your rent, or the countless amount of other circumstances that could increase your annual rent.
The dream of homeownership will always be a constant. Between more privacy, security, flexibility, financial stability, and pride, being a homeowner has endless benefits. Renting is a great option for many, but it doesn’t offer tax incentives, fixed costs, or building of equity, so while it is an easier option to start with, it won’t present prosperity for your future.
The question often asked is: when is it the right time to take that step? Your future is waiting for you, so maybe the real question is: why haven’t you taken the step towards homeownership yet?