Buying a Home with Your Reverse Mortgage- It’s a Reality!

Buying a Home with Your Reverse Mortgage-Its a Reality- 150x150Once you reach retirement and old age, you might find that your current home is not suitable for your age, and consider buying a new one. Being retired and on a fixed and probably fairly low income can interfere with your plan of buying a new home. Lenders look for good credit scores and incomes when giving out mortgages and most people over 62 simply cannot qualify. Fortunately, reverse mortgages, which have become very popular lately, will allow you not only to tap the equity in your home and receive a nice amount of much needed money, but to also buy a home.

The United States Department of Housing and Urban Development (HUD) started to allow seniors over the age of 62 to use a reverse mortgage for the purchase of a home. The Home Equity Conversion Mortgage (HECM) for Purchase Loan is insured by the Federal Housing Administration and allows people who are 62 or older to use the equity from the sale of a previous home to purchase their next primary residence.

Using a Reverse Mortgage to Make a Home Purchase

Most people who use a HECM for Purchase Loan do it in order to find a home that would be better for someone who is old. The home that you live in might be too large, so cleaning it would be a burden, or hiring someone to do the cleaning may be too expensive. Bigger homes also mean larger utility bills, which can also be a financial burden. If your home is in an area that is too far from where your family and friends live, you might have another reason to move into a new home. Also, because you won’t have to make monthly mortgage payments, you get to enjoy your hard-earned savings without the stress of having to make a large payment each month.

Using a reverse mortgage to purchase a home comes with a few requirements. Here’s what you need to keep in mind before applying for a HECM for Purchase Loan:

  • To qualify for a reverse mortgage, the youngest person on the title of the home must be 62 years or older.
  • The home that you are purchasing must be your primary residence and must be occupied within 60 days of the loan closing date.
  • Your new home purchase must be a single family home or a condo that is approved by the Federal Housing Administration (FHA).
  • If the reverse mortgage loan doesn’t cover the price of the new home, the rest must be paid from qualifying sources, such as money from the sale of your previous home, or your savings.
  • This type of loan can only be used for a home purchase, and cannot be used for the construction of a new home. However, the HECM for Purchase Loan can be used to buy a newly constructed home, as long as the home is approved for occupancy.

Seniors who wish to take advantage of this type of loan can choose between the standard and the saver version, with either a fixed interest rate or an adjustable one. The saver version of the loan features lower upfront costs, but less money can be borrowed, so most people will choose the standard version of the HECM for Purchase Loan.

Buying a new home after retirement may seem difficult or impossible, but it can be done with the help of a reverse mortgage. However, before taking this step, you must ask yourself why you want to do this and, if the reason is strong enough, make sure that you qualify and can afford to pay the difference between what you borrow and the price of the home from your own pocket.

Shared Equity Mortgages- Are They Worth It?

Shared Equity Mortgages- Are They Worth It-150x150The purchase of a home involves a large investment, money that not everyone has available. A down payment of 20 percent or more will have to be made in order to avoid paying private mortgage insurance. Add several fees and closing costs to that and you are looking at an initial investment of tens of thousands of dollars. Borrowing that kind of money from a relative can be extremely difficult. Your family member could invest that money into something that will yield a nice return, so it would be unfair to deprive them of that. One solution would be for the relative or even a friend to become a co-investor in your home.

Shared equity mortgages allow you to find a co-investor that will provide part of the down payment, with the condition that he or she has the right to a percentage of the property’s value. While home prices can increase over time, and both investors can turn a profit, there is always the risk that home values will decrease, and both investors will lose money. Fortunately, real estate is a profitable investment more often than not, so a shared equity mortgage can make more sense than many other investments. By using a shared equity mortgage, parents also have the chance to help their children become home owners without having to dip into their investment funds.

Advantages of Shared Equity Mortgages

The largest advantage of shared equity mortgages is that, depending on everyone’s financial situation, one person can only occupy the home, while the other invests in it. This way, the person occupying the home doesn’t need good credit or money for the down payment, while the investor makes a larger return on his or her investment.

Another benefit is that someone can become a home owner much quicker than it would take if he or she took time to save money for the down payment and closing costs. Of course, the profit will have to be shared with the other investor in the future, so deciding if a shared equity mortgage is right for you depends mostly on your plans.

A third advantage is that both people who have invested in the home have the right to benefit from the real estate ownership tax benefits. When writing the shared equity mortgage agreement, the investor must not be considered a lender, because that would disqualify him from being entitled to tax benefits. Also, the person who will occupy the home must not be considered a tenant in the written agreement. This can be avoided by hiring an attorney to draft the shared equity mortgage agreement.

Disadvantages of Shared Equity Mortgages

The biggest disadvantage is that, if the housing market drops, the investor will lose money. That is a risk that investors take when making any investment, but the real estate industry has proved to be a fairly solid investment over time. Another disadvantage is that sharing equity can become expensive if the two parties involved start disagreeing on things like who pays for the property taxes and insurance. Also, the investors’ credit score can be negatively affected if the mortgage goes into default.

Shared equity loans can be a win-win for both parties, as long as there is a written agreement in place. One of the parties gets to become a home owner, without spending too much on the initial costs of buying a home, while the other party gets to invest their money into something that will most likely generate a profit.

Here’s a Cheatsheet to Understanding House-Pricing Indexes

Heres a Cheatsheat to Understanding House Pricing Indexes- 150x150House-pricing indexes measure changes that occur in the pricing of residential homes. The most commonly used house pricing index is the Case-Shiller Index, put together by Karl Case, Robert Shiller and Allan Weiss in the 80s. After developing the housing index, they started a company to help them sell the research. Their company was later purchased by Fiserv, Inc., which records the data behind the index. After the data is recorded, it is distributed by another financial services company called Standard & Poor’s.

The Case-Shiller index is actually composed of several indexes, such as the national home price index, which is determined quarterly and published in February, May, August and November. Another index is the 10-city composite index, and it covers the following cities: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, DC. A third index is the 20-city composite index which, besides the cities listed above also includes: Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle and Tampa. Also, all the cities in the 20-city composite index have 20 individual indexes.

What Does the Case-Shiller Index Do?

The Case-Shiller index analyzes the changes in the pricing of single-family homes by comparing the prices for which the same properties have sold over time. Because newly built homes don’t have a pricing history, they are excluded from the analysis conducted by the Case-Shiller index. New homes usually must have had 2 owners before it can be determined how their pricing has changed over time. Condos are also excluded from the Case-Shiller index, although there is an index that analyzes condominium pricing in five major areas: Chicago, Boston, Los Angeles, New York and San Francisco.

The Case-Shiller house-pricing index tracks homes sold at market value for prices that can be used to accurately determine the state that the housing market is in. Transactions where homes have been sold far under market value, for example between close family members, won’t be included in the case-Shiller index, because they don’t accurately represent the housing market activity in that area. However, foreclosure sales are included in the Case-Shiller index because they are considered regular transactions.

Home-pricing indexes help both home sellers and home buyers. Buyers who look at indexes and see that home prices tend to increase will know that they have to hurry up and make their purchase before prices go up significantly; sellers who notice that prices are increasing can wait a while longer until they put their house on the market and increase their chances of getting a better price.

Other House-Pricing Indexes

The Case-Shiller house-pricing index might be the most popular, but there are a few other indexes that track home prices. One of them is the United States Federal Housing Finance Agency (FHFA) which, besides sales, also includes refinances. The FHFA includes 363 metro areas and covers mortgages for single-family residences which are backed by Freddie Mac or Fannie Mae.

Other indexes are the LoanPerformance Home Price Index, which covers almost the whole country, and the IAS360 House Price Index, which is published with a smaller lag than the Case-Shiller index, making it more accurate.

The Case-Shiller and other house-pricing indexes can help, whether you are looking to buy a home or sell one. Keeping a close eye on these indexes before getting involved in a real estate transaction can help you get a better deal, or, at the very least, help you better understand the housing market.

Thinking of Buying a Home? Ask Yourself These Questions First!

Thinking of Buying a Home-Ask Yourself These Questions First- 150x150Low home prices and interest rates might seem very attractive to you, and you might want to buy a home before these prices and rates start going up. However, your financial situation might make it difficult for you to buy a home at the advertised price, while paying a low interest rate. Interest rates that are advertised by lenders are usually reserved for home buyers with stellar credit score, so you might end up paying significantly more on your loan than you were expecting to.

Many first-time home buyers are so blinded by the low interest offers advertised by lenders, that they forget all about the large down payment needed in order to avoid paying for Private Mortgage Insurance, and about the fact that their credit score will have a big impact on the interest rate that they will actually be paying. Here are a few questions that you should ask yourself before thinking of buying a home.

Is This a Good Time for You to Buy a Home?

Buying a home is very expensive initially. If you wish to receive better rates and not be required to pay for Private Mortgage Insurance, your down payment will have to be at least 20 percent of the total loan amount. That can mean several tens of thousands of dollars for an average priced home. Besides the down payment, you will have to pay for inspections, and various closing fees, which can come up to a few thousands of dollars, as well. There are several alternatives to making a large down payment, but you will probably end up having to spend more elsewhere, and maybe end up spending more than you would have on the down payment.

You might think that the large initial cost is the only expensive part of buying a home, but you also need to keep in mind that you will have to pay tax on your property and homeowners insurance. The upkeep of your home can also be very expensive, but this depends on many factors. Your home might need an expensive roof, plumbing or electrical repair, unexpected expenses that might take you by surprise.

Do You Have Good Credit?

You can probably qualify for a mortgage loan with a less than good credit score, but you will have to pay a much higher interest rate. A perfect credit score will most likely guarantee you the best current mortgage rates, but anything less and you will start to see those rates climbing. The difference won’t be that high, unless your credit score is lower than 700, but, over time, you will feel the difference in your wallet.

If your credit score is lower than perfect, you might want to take a little time to try and improve your credit score before getting a mortgage loan. You can start by paying off other debt, and making sure that all your payments are on time.

Is Home Ownership for You?

Some people buy a home and end up feeling that they have made a mistake, that renting was better for them. Being a home owner comes with larger responsibilities, like taking care of the house, making repairs and maintaining it. Sure, you can hire someone to do it for you, but hiring someone for every little task will become very expensive, so you’ll be better off learning how to do most minor repairs and maintenance work yourself.

If you are looking for a home that needs less maintenance and has a smaller chance of needing major repairs, then you should look at apartments. You will still be responsible when something breaks, unlike when renting, but it will be fairly low maintenance compared to a house.

Are You Going to Live There for a Long Time?

Like we’ve mentioned earlier in this article, buying a home comes with some pretty high closing costs. If you plan on moving in the near future, you will recover the money that you put down and the monthly payments, but not the closing costs. However, to build equity in your home, you will need to live there for a longer period of time. The monthly payments that you make in the first years will go more towards the interest, so the equity will build up very slowly. Selling your home after a short period of time can result in you losing money.

Becoming a home owner is a dream come true for most people, but it comes with great responsibility, and a large number of expenses. Ask yourself the questions listed in this article before you start looking for a home, and find out if home ownership is for you, or if you would like to postpone it for a few more years.

Getting a Mortgage Loan for Manufactured Homes – It’s Easier Than You Think!

Getting a Mortgage Loan for Manufactured Homes-It's Easier Than You Think- 150x150Manufactured homes are a good alternative to conventional homes, but still follow a similar home buying process. A manufactured home, also referred to as a mobile home, is a type of home that is factory built, with a steel frame, and that can be transported anywhere on its own wheels. This can also mean homes that are prefabricated, meaning that they look very similar to traditional houses, but are built as modules that are then transported and assembled on a normal house foundation.

These types of homes are usually cheaper than traditional homes, but most people will still probably have to take out a mortgage loan in order to purchase a manufactured home. Unfortunately, getting a home loan for a manufactured home can be more difficult than taking out a mortgage for a traditional home. Not only that, but you will most likely have to pay a higher interest rate on a manufactured home. Two or three percent more on your interest rate can mean thousands over time. Here are a few options if you are considering buying a manufactured home with a mortgage loan.

FHA or VA Loans

The Federal Housing Administration (FHA) and the United States Department of Veterans Affairs (VA) have designed mortgage loans that can help home buyers with lower incomes as well as for military active and retired personnel.

Because the minimum square footage is required to be 400 feet for an FHA loan to be approved for purchasing a manufactured home, single-wide homes cannot be bought using this type of government insured mortgage loan. Also, the home owner must pay the same property taxes as he or she would pay on a traditional home. In most areas the owners are required to strap the manufactured home to the ground using anchors or concrete pylons. The home’s wheels may have to be taken down, depending on that area’s regulations. The amount that you can borrow to purchase a manufactured home is much lower than the amount that you can borrow for a traditional home, when taking out an FHA mortgage loan, and it is based on whether you take out a mortgage for the lot, the home, or both.

The United States Department of Veterans Affairs requires that you use the home as your primary residence in order to qualify for a VA loan. Your credit score must be good and your debt shouldn’t be more than 41 percent of your income. You are able to borrow up to 95 percent of the home’s value with a VA mortgage loan.

Lot Owners Are At An Advantage

If you own the lot on which the manufactured home will be placed, and if it will be placed on a house foundation, you will receive better interest rates and loan terms from lenders. If the home will be your residence, you will be able to deduct your interest payments. However, this won’t be the case if you rent the property.

Normally, financing for manufactured homes is done through the company that sells the home. Other lenders will, most likely, require that you own the lot on which the house will be, or your mortgage loan application will risk being denied.

Manufactured homes are cheaper than traditional homes and is a great alternative when you don’t have enough money available to buy a home. Before buying a home with a mortgage loan, do a little research in order to avoid being denied the loan for something that could have been prevented.

Making an Offer on a Home? Here’s How!

Making an Offer on a Home-Here's How- 150x150Making an offer on a home can be somewhat confusing for most first time home buyers. Before making an offer, most people inevitably ask themselves if maybe the offer is too low or too high. Unfortunately, there is no set in stone rule when making an offer on a home. There are several factors that you should take into consideration before contacting the seller with an offer. These factors can make it easier for you to tell how much the seller might be willing to accept for his or her home.

Whatever your offer ends up being, keep in mind that a verbal promise is not legally enforceable. You will need to make an offer in writing, which will also include the terms and conditions of the purchase. Your offer will only be the first step of the negotiation process. The seller will, most likely, get back to you with a counter offer, which you can take or try to negotiate further.

Deciding on How Much to Offer

When making an offer on a home, you will have to make sure that the offer is not too low, which can result in the seller feeling insulted. Also, you have to make sure that the offer is not too high, because that will be more money out of your pocket. So the solution is finding a middle ground, a price that will satisfy the seller, and one that you can live with. Before making an offer on a home, you should do some research, which will help you better evaluate how much the home is actually worth, and give you information to back up the price you offer.

  • Find out how much other comparable homes have sold for recently. Your real estate agent can probably help you with finding out how much other homes like the one that you are prepared to buy have sold for in the past few months. Try to find homes that are as similar as possible, in the same area with the same number of rooms, similar amenities and appliances.
  • Find out if the local demand for homes is high or low. Finding out if there’s a high or low demand for homes in the area is really important and can help you significantly in coming up with an offer. If the demand for homes is high in the area, then prices are going up because it’s a sellers’ market, and you will probably have to compete against other bidders for that home. If the demand for homes is low in the area, then you probably won’t have any competition, and it will give you more room to negotiate.
  • Find out if other buyers are interested in the home. Having competition means that you will probably have to outbid other buyers in order to purchase the home. This is not a good situation to be in, so your first offer should be closer to the asking price. This will increase your chances of being the one that wins the bidding war, but it is up to you to decide if paying close or even exactly the asking price is worth it.
  • Find out if the owner is in a hurry to sell. The seller might need to move quickly or need the money from the sale for a new home. Knowing this means that you can negotiate more aggressively, especially if there are no other buyers involved.
  • Find out what condition the property is in. It may cost you a few hundred dollars, but having the home professionally inspected before signing a contract can save you a lot of money and headaches in the future. Based on the results of the inspection, you can also decide how much to offer.

Making an offer on a home is not as easy as it looks. But researching your purchase and knowing what you are looking for can put you in a position where you know how much you can negotiate, and better estimate how much the seller is willing to accept. Remember that making an offer that is too low is almost as bad as making an offer that is too high. The price will usually be the maximum that the seller expects to receive for the home, but that doesn’t mean that they will go much lower than that. Based on the factors listed above, you should be able to come up with the perfect offer which the seller will hopefully accept.

To Buy an Existing Home or a New Home, That is the Question

To Buy an Existing Home or a New Home, That is the Question- 150x150There may come a time in your life when you will want to stop paying for rent or living with your family or friends and become a home owner. One of the most basic dilemmas that most people who are looking into home ownership have is whether to buy an existing home or a new home. Finding the answer to this dilemma is surprisingly difficult because there are many factors that you will have to take into consideration when buying a home. Both choices have plenty of advantages and a few disadvantages, which should be carefully looked into before deciding which way to go.

Advantages to Buying an Existing Home

Buying an existing home may not seem that beneficial for you at first glance, when compared to buying a new home or building your own. But there are some clear pros to buying an existing home and they shouldn’t be overlooked. Here are the most important:

  • Location. Existing homes are most likely built closer to major metropolitan areas, which will make your work commute and shopping significantly less difficult and cheap. Many new homes are built at the edge of the city or town, so your commute will be longer, which means that you will be spending more gas and time on the road every day. Check out the most expensive housing markets as well as the least expensive housing markets to help make your decision.
  • Build quality. Both construction materials and labor were less expensive in the past, which means that even if the home is a few years older, it’s very likely that it was built stronger and with better materials than a home built recently.
  • Appliances. Many existing homes are sold with included appliances, such as stoves, refrigerators, or even television sets. Buying a new home or building means that you may have to buy all or some of these appliances which can end up being quite expensive.
  • Better curb appeal. Most existing homes have mature trees around them and landscaping. You probably won’t get that with a new home, and, depending on which area the new home is built in, you may have to wait years until your home’s surroundings will be complete with mature foliage and finished construction projects.
  • The neighborhood. Most existing homes are located in already established neighborhoods, so it will be easy for you to find out if you are moving into a good or a bad neighborhood. You can also find out what your neighbors are like before buying the home. When buying or building a new home in an unknown area, you can end up having some unwanted developments built right next to your home.

Advantages to Buying a New Home

Buying a newly built home or building your own home also has plenty of advantages and, depending on your situation, might be the better choice. Here are the pros to buying a new home:

  • Location. While this can also be considered a disadvantage, living on the outskirts of a city, where new houses are often built, can also be a blessing for those who want to live away from the noise and agitation of a large city. If you’re looking at rural areas, you can potentially apply for a USDA mortgage loan.
  • Less maintenance. A newly built home will need repairs and maintenance much less than an existing, older home. Many parts of the home may even be covered by a few years of warranty. Serious and expensive repairs to things like the roof or the electrical system will be much cheaper or even free if they are covered by a warranty.
  • More modern. People’s taste in homes changes over time, which means that you will probably like a new home, with bigger rooms and a more modern design. On the other hand, older homes may have certain unique architectural elements that you my like.
  • More energy efficient. Because new homes are made with newer materials, they may be better insulated, making your energy and heating bills much lower. Existing homes usually cost more to heat or cool, but it generally depends on the age of the construction.
  • Amenities. Many new homes may offer amenities that are not usually offered when moving into an existing home. These amenities can include a swimming pool, jogging trails, or playgrounds for your children.

Buying an existing home or buying a new home may seem like an easy decision, but it is actually a very serious and difficult decision. Whatever your budget and requirements are, you should not dismiss either option before taking a closer look at what each has to offer. Additionally, renting a home may be an option to consider. You might be set on buying or building a new home, only to find that it will be much cheaper and convenient to buy an existing home that will satisfy all your needs.  Alternatively, you may also find that buying a new home over an existing home can be more beneficial for your situation.

10% Down Payments are Back!

10 Percent Down Payments are Back-150x150Becoming a home owner is many people’s dream, and at one point in their life, it will probably become reality. But there are several factors that need to be considered when buying a home, most of them related to how much you will be spending on your loan. Finding a home is the easy part, and you probably won’t encounter too many issues there. But making sure that you are not overpaying is a little harder, and will require some research.

Of course, your financial situation may require you to make some compromises, such as having lower monthly payments at the cost of paying more overall on your mortgage loan. Another aspect of your loan in which you can compromise is the size of your down payment. For years, the majority of lenders have required borrowers to make a 20 percent down payment, but it looks like 10 percent down payments are back, and they are an attractive alternative to many home buyers.

Advantages of Making a 10% Down Payment

Depending on how much the home that you are buying is worth, a regular 20 percent down payment can mean a large amount of money, which many home buyers are not able to afford. For some, it might take years to come up with the 20 percent down payment, so the 10 percent alternative is a good option. Besides the down payment, home buyers shouldn’t forget about other costs associated with taking out a mortgage loan, such as closing costs and insurance. Closing costs can be very high, making the 10 percent down payment even more attractive, compared with the hefty 20 percent down payment.

Another advantage of not having to save for a long time in order to come up with the 10 percent down payment is that, when saving money for a few years, there is always a chance that home prices may rise, making it impossible for you to buy a home with the amount of money that you have saved up. You should also take inflation into account- 20 percent of the cost of the home right now will, most likely, not represent 20 percent of the price of a home a few years from now.

Even if you can afford the 20 percent down payment, you can choose to only put down 10 percent and use the other 10 to finance repairs or improvements to your new home. That extra 10 percent can also be used for investing in stocks or mutual funds, but this is only recommended for those who have experience in these types of home investments.

Disadvantages of Making a 10% Down Payment

One large disadvantage to making a 10 percent down payment is that qualifying for a lower down payment is fairly difficult. Lenders require your debt to be less than 45 percent of your income, and your credit score to be above 700. Many of these restrictions apply to 20 percent down payments, as well, so qualifying for a 10 percent down payment won’t be too difficult if your only problem was coming up with the 20 percent required by all lenders until now.

Another disadvantage is that, if home prices go down in the future, you could end up with a home that is worth less than what is owed on the mortgage. If this happens, you may not be able to sell your home, which may lead to other serious issues. 10 percent down payments can also be problematic if you have little equity in your home and decide to sell. Your loan value plus selling costs can be higher than the sale price, resulting in you losing money.

10 percent down payments are back, and that is good news for home buyers with good financial situations, but who can’t or choose not to make a 20 percent down payment. But before deciding how much of a down payment to make on your home, you should calculate how much money you would save or lose with each option. If the down payment size is the only thing standing between you and home ownership, then go for it, but you shouldn’t choose to make a 10 percent down payment just because you can, without weighing in on both the advantages and disadvantages.

Renting vs. Owning: Which is Best for You?

Renting vs. Owning- Which is Best for You-150x150Right now when the housing market is slowly recovering and interest rates are still near record lows, it might be the best time to consider becoming a home owner. Of course, depending on your financial situation, home ownership might not be the best choice for you. People have always debated whether it’s better to own a home or rent one, but the truth is that it mostly depends on each person or family’s budget, location, and future plans.

Owning a home can be as affordable as renting or even more affordable in some parts of the United States. The difference in price can be easily figured out by simply comparing mortgage prices to rental prices in your area. But even if renting seems cheaper, you will need to take into consideration all the advantages that home ownership has to offer.

Factors that Should Influence Your Decision

First of all, probably the most important factor that will influence your decision on whether to rent or buy a home is location. Prices fluctuate significantly depending on what area the home is located in. You might want to be closer to your job, which may make you look at homes in more expensive parts of the city or town. Prices for homes could be well out of your price range, so renting will be your only viable choice. Alternatively, you could move to a less expensive area, which will make your daily commute longer, but will give you the advantage of being able to afford buying a home.

Another factor that will have an impact on your decision is timing. You have witnessed the rise and fall of the real estate market during the past few years, and you have probably realized that buying a home has a lot to do with timing. Millions of people have lost their homes during the economic collapse because they became home owners before the housing market bubble burst. Interest rates also fluctuate, so buying when interest rates are low is a wise choice.

Last, but not least, one factor that should influence your decision is your financial situation. When analyzing your financial situation, you need to have a look at both your savings as well as your income and future earnings. This way you will determine if you are in a good position to become a homeowner, or if you should rent until you can make the necessary changes that will allow you to buy a home.

Pros of Owning a Home

Becoming a home owner is something that most people aspire to. Statistics show that home ownership in the United States is at nearly 70 percent, which means that it is a dream that can come true quite easily. Home ownership comes with great advantages that you won’t get if you rent. Here are some of them:

  • Equity. When paying your mortgage loan, you are increasing your degree of ownership with every monthly payment. By paying rent, you are pretty much losing that money, as opposed to ownership where you can actually borrow against your equity to finance other purchases or refinance your home.
  • Tax deductions. Your mortgage loan interest and property taxes are tax deductible, which will save you a significant amount of money each year. If you work from home, your home office and part of your utilities may be eligible for further tax deductions.
  • Make changes to your home. When you own a home, you can decorate it any way you want. You can paint the walls any color you choose, hang pictures on the walls, and even add rooms or other structures to it. When renting, you can only make small modifications, and you will most likely need the building owner’s permission.
  • Choose how to deal with repairs. Whether you can repair and maintain your home on your own, or hire a contractor, you can do as you wish, without being at the mercy of your landlord, as is the case with renting.

Pros of Renting a Home

Depending on many factors, renting could be a more viable option than owning a home. Here are some of the more important benefits of renting:

  • Low upfront cost. When renting, you are required to pay the first and last month’s rent, and probably a security deposit upfront. There are no large down payments, home inspection fees, and closing costs, like when buying a home. The difference between the upfront costs of renting and buying can be as high as several tens of thousands of dollars.
  • Easier to relocate. If you need to relocate for reasons such as a job change or divorce, you can easily pack up and move. Also, if your salary changes, you can easily move to a different area.
  • Increase your credit score. A low credit score can get in the way of becoming a home owner, so renting for a while not only allows you to have a roof over your head, but it will also help increase your credit score and get back on the path to home ownership.
  • No repairs and maintenance. If something in your rented home, like appliances or fixtures, stops working or breaks, you won’t have to replace it and pay for it. The landlord will take care of repairing and replacing things.

Both owning and renting have their advantages, but choosing one or the other will mostly depend on your budget and plans. Prices and interest rates fluctuate often and sometimes significantly, so buying a home at the opportune time will save you a lot of money and future headaches. Also, if you are not comfortable with the current housing market situation or your financial situation, then renting will most likely be the better choice.