Discussion of Rent or  Own

Factors involve in the question–Own vs rent, are described below.  The bottomline is:  owning a home currently costs less than renting when all details are considered.  Read below for reminders and recommendations:

  1. Looking for the Largest Deduction
  2. Every Renter Should Know
  3. Rent vs Buy – the cost is going up
  4. Rent vs. Own. What Can You Expect?

Looking for the Largest Deduction

Each year tax payers make the choice to take the standard deduction or opt for the itemized deductions.  It’s probably prudent to check each year to see which choice will result in the greatest tax savings.

If we look at the2013 standard deduction,  a married couple filing jointly can deduct $12,200 and for a single taxpayer it’s half the amount, $6,100.  It doesn’t require any proof of actual expense and has no requirement for home ownership.

The following can be used for itemized deduction on Schedule A:

•    Certain taxes paid for state and local income tax, general sales tax, real estate property taxes, personal property taxes or other taxes paid
•    Home ownership related items such as home mortgage interest, interest related to investments and possibly, mortgage insurance premiums.
•    Contributions to charities
•    Loss due to casualty or theft
•    When dental and medical expenses exceed 7.5% of adjusted gross income, they qualify as deductions if you were born before 12/49; and 10%  if you were born after 1/2/49
•    Any expenses related to your job or any other deductions that exceed 2% of adjusted gross income.

Routinely, many may make the assumption that unless you own a house, itemized deductions isn’t the best option for them.  Non-owners need to look at this section of the return again.

Why?  Mostly because contributions to charities may be size-able enough now that they qualify as itemized deductions.

Rent or Buy – the cost is going up

Regardless of whether you choose to rent or you decide to buy a home, Zillow reports that the cost for both is rising.  Expectations are that home prices on a national basis will rise by 3%.  Mortgages are expected to rise to %5 by year’s end.  Rents are projected to increase an average of 2.5%.

When there is a property in question whether you rent to occupy or purchase to live in, all residents are paying for housing.  The appropriate question is whether the equity that builds and the appreciation of the home that results would be in a landlord’s favor or for a non-renter or homeowner.

The example uses a $200K residence that is purchased with FHA 30 year mortgage with interest set at 4.3%.  Other assumptions are an appreciation of the residence at 3% and a rent of $1,750 monthly.

As a homeowner, the total payment that includes the usual principal and interest plus taxes and insurance is estimated at $1,609 monthly. Then when you take in the increasing equity growing as monthly payments are made, the house appreciation, cost of maintenance, tax savings, the balance net is about $630 compared to the original $1609.

The figure of net cost would be $919.06 monthly when you ignore the tax savings.  In short, the tenant would be paying out much more when renting rather than owning. This illustrates the advantage to a tenant to consider buying a home.

Get more exact relevant figures using: this calculator

And if you decide to purchase a home, please. contact us

Rent or Own. What Can You Expect?

While there are few constants in life that we speak about other than taxes and death, potential homeowners can realistically expect that there will be rises both in the price of homes and increases in mortgage interest rates.In order to strengthen the economy, the Federal Reserve has kept interest rates low.  Soon these artificially manipulated rates will be lifted and experts expect a certain rise that will result in homeowners looking at higher rates for mortgages.  Already rates on 30 year fixed rate mortgages have risen since the first of 2013.

For two years now the rates of foreclosures have decreased, and there’s been an increase in home starts.  Thus, home prices have been rising and will continue to do so.

While a potential buyer is in indecision, he is likely to see monthly payments rise by about $175 each month assuming prices rise by 2% and mortgage interest rates by 1%.  On can speculate what a decision now resulting in such savings a month could be lead to.  What purchases? Used for paying down the mortgage?  Purchases of cars?  Furniture?  Savings?

For specifics about the cost of indecision is for the home price range you are looking at, . click here
Every Renter Should Know

Did you know that home buyers usually have spent years on planning and thinking about buying their first home?  Then they spend at least 12 weeks looking and doing research before they make an offer.

Yet, there are renters are more casual when they select their housing and not as thorough.

Here is a list of reminders for renters:

1.    Remember when a lease is signed, it is a legal document and binding.A lease is a binding, legal document
2.    Make sure you understand the details of the list before you sign; ask questions.
3.    Leases need to be in writing; verbal agreements are risky.
4.    Know your rights as tenants; state and city may make a difference.
5.    Renter’s insurance to cover loss and damage, and liability is needed.
6.    Know that the landlord is responsible for your housing, that it remains habitable and safe and should provide for repairs that come with normal wear and tear.
7.    Even before signing a lease make sure you walk through the property.
8.    If you have a disagreement with your landlord, you are still obligated to pay your rent on time.
9.    When you ended your rental your landlord should return your deposit within a reasonable length of time.
10.    It’s important to check to see whether owning a home would be less expensive than renting.

When mortgage rates are exceptionally low, what you pay for house payments although it includes taxes and insurance, may in the end cost you less than to rent. Factors of appreciation, the amortization schedule that results in forced savings, tax savings, all bring the cost of owning down to half of what you pay for rent.

Check out your net cost of housing.

We are here to answer any questions.  Learn about . Judy Naimo