Is it time to move? Should I continue renting? Should I be house or condo hunting? If you’re starting to ask yourself these questions, you’re also likely turning to friends and family for advice, too. Before you’re swayed one way or the other, consider these three myths often thrown into the buying or renting debate.
Myth #1: You should buy in a buyer’s market.
Buyers beware. Never purchase a home based solely on the market. Just because the market looks good, does not mean it’s good for you. Your first step should be identifying where you stand financially. Determine how much you can safely afford to spend each month on housing or you may be at risk of living beyond your means.
Myth #2: If you own a home, you’ll benefit from the tax breaks.
This is not always the case. While the interest and tax property portions of your mortgage payment may be tax deductible, home improvements, home insurance and losses on the sale of a home are not and never have been tax deductible.
With the recent tax law changes, when it comes to purchasing a home, interest on only the first $750,000 of your mortgage will be deductible. And keep in mind that many states do allow renters to deduct a portion of their rent from their state taxes.
Myth #3: You’re throwing money down the drain by renting.
While this can certainly be a tempting way to think, it is not necessarily true. By choosing to rent, you are satisfying your need for shelter. You have a roof over your head, but unlike purchasing a house or condo, you’re not responsible for the day-to-day upkeep.
When renting, you also benefit from flexibility. You can change apartments much more quickly than you can sell your home, and the money you may have been putting towards mortgage payments is free to be funneled into other investment opportunities.
To help guide your decision, here are some things to consider (both good and bad) about buying or renting:
- Not paying for your own mortgage
- Not responsible for major upkeep
- Subject to landlord rules (i.e. pets, smoking, painting, parking)
- Flexibility in terms of moving
- Up-front Costs: Security deposit, First and Last
- Building equity
- Responsible for all upkeep
- Your rules go
- Pets welcome
- May lose value
- Up-front Costs: Large down payment, cash to cover closing costs, moving expenses, emergency fund
- Best to stay put for at least seven years
Choosing whether to purchase a home or continue renting ultimately comes down to your financial standing and personal preference. What may be right for your neighbor may not be right for you. That said, be sure to make an educated decision and don’t be fooled by some of the myths around this ongoing topic!