When it comes to making the biggest financial leap of a person’s life…purchasing a home, it can seem overwhelming. Young people often ponder if this is the right time for them to make the transition from renting to buying. Take a look at the chart below which illustrates the optimistic benefits of homeownership over renting.
Lucky for you, The New York Times has a easy to follow calculator where you manipulate each setting to reflect your current financial and social situations. Keep in mind this calculator’s methodology; the money you would spend on closing costs or a down payment for a home, should be invested or saved should you REMAIN renting. Basically, it is calculating the opportunity cost of buying a home versus putting that money into investment opportunities.
According to Trulia’s Winter 2014 Rent Vs. Buy Report “buying a home is 38% cheaper than renting.” This concept encompasses our entire nation, however the percentage in which buying is cheaper is different between regions. Forbes tells us that mortgage rates would have to increase to 10.6% for renting to be nationally cheaper than buying. See their statistics here.
Here are a few things to think about when considering purchasing a home…
- Buying a home means getting a piece of real estate profits
- Think about the tax benefits homeowners are eligible for, and even some car insurance companies lower your monthly premiums if you’re a homeowner
- When you make improvements, upgrades, or purchases that benefit your home you are benefiting yourself, not someone else’s house or apartment
- You could be asked to leave at any time when renting, home owners can stay as long as they like (given the loan terms and staying up to date on payments)
- The sense of pride and accomplishment that comes with owning your own home is a great feeling