When a potential buyer thinks of buying a home, the first thing to consider is the time period that he’ll be staying in the particular locality. Prospective purchasers believe several myths when it comes to choosing the rent vs. buying options with an aim to justify their investment. They buy houses that they can’t afford during the boom. Now that the housing market is in a mess, people have started to realize that renting is not that bad. However, there are various myths when it comes to calculating the pros and cons with regard to renting vs. buying that has ruined the housing market.
Myth: Waste of money = Renting
It is said that renting is like wasting money. People who buy houses give their hard earned money away to the bank till they own the home. On the other hand, people pay rent for the shelter provided to them every month. Neither do they give interest to the bank, nor do they pay any kind of property tax or maintenance charges.
Instead of wasting money, the smart renters take the extra money that they save by rent and invest it into shares, stocks, various kinds of bonds and other investments that will give them a better return.
Myth: Tax Benefits attached to Owning the home
It is said that the buyers do not take back the credit interest they have paid throughout the year at income tax time. The interest can be deducted only from taxable income. Moreover, subtracting the interest has no tax benefits unless the purchaser pays a good deal of interest such that the sum goes beyond the typical deduction that everyone is allowed to take.
Myth: Renting is expensive than Buying
When people usually rent a home they pay the rent for the first month and last month in addition to a security deposit for the house. Every part of the amount paid goes towards the obligations of monthly payment. The only exception here is the security deposit which is generally given back to the renter when the agreement is over.
However, when a buyer buys a home, the money paid is more vital and no part of it will be seen again. Preliminary costs aside, the various other costs that the owner is responsible for are the mortgage interests, the property tax, insurance and maintenance expenses of the house. These costs generally add up with time and can also increase in the future.
Myth: Buying is good Investment
Generally, everyone thinks that buying a house is a great investment especially during the boom period. Many of the buyers buy property assuming that the prices of houses will always go up and never come down. However, it is this insanity that resulted in the biggest housing crisis in the United States of America.
The fact here is that housing is not an investment rather it is shelter for one and all. Further, in comparison to the mortgage payments, the monthly rent is quite comparable and affordable. If you plan to move your location to another place in future, you should strongly consider renting than buying.
Today’s guest post is submitted by Jacob Lee, a successful real estate agent. He is also an avid blogger and shares real estate tips through his articles. He feels buying brand new homes in this failing economy is nothing short of a miracle these days.