Orange County Home Buyer Resources Why buy a home?

The advantages of Home Ownership vs. Renting

While there may be few advantages to renting, there are many more advantages to being a homeowner! Think about it. Every time that you write that rent check, you are building equity and providing tax deductions for the owner, not to you!

Building Equity  - Unfortunately, those people who say you're "throwing your money away when you rent" are basically correct. You never build any equity in your rental home regardless of how much you pay. Once you move out, you have nothing to show for your years of paying rent. With a home, however, your mortgage payments build equity and if you ever want to move, you can sell your home and get much (if not all) of those payments back.

Tax Advantages - If you own a home, you can take advantage of deductibles for your mortgage, improvements, losses and several other aspects of home ownership. When you're renting, you don't have any tax advantages. You simply pay your rent each month and your landlord or property manager enjoys the tax write-offs and other advantages of owning a property.

You can personalize your living space - In most rentals, you can't even paint your living room without written permission from your property manager or landlord. In some cases, you can't even hang pictures without paying a fee when you move out. You are very limited in ways in which you can personalize your space. For some renters, that can be very frustrating. If you own your own home, though, you can make any changes you want to. You can add an extra room or even paint polka dots on your walls if you'd like. The options are endless!

It still makes sense to Buy versus Rent

Renting may be costing you a bundle - Let's look at an example :

If you are paying rent at $1,500 per month and your landlord increases your payment by a modest 5% each year, you would wind up paying just about $100,000 over a 5-year period! Worse yet, after forking over $100,000, you still would have nothing to show for it.

And speaking of having nothing to show for it, how about any improvements you might make to a rental property? It's not uncommon for renters to freshen up the paint, install new light fixtures or plant some nice flowers outside. But guess what� all your efforts, labor and the benefit of that improvement belong to the landlord, not to you.

With convenient down payment options still available for qualified buyers, affordable home prices and low interest rates, the very same money could have been used towards home ownership.

Even using a standard 30-year fixed program, a mortgage of $300,000 could be obtained with a total monthly mortgage payment�including property taxes and insurance�of around $2,200. Assuming a 25% tax bracket, this would be equivalent to the average amount spent on rent during the same period after your tax benefit.

And the benefits of home ownership are quite considerable. Because the mortgage is being paid down each month, equity is being built. After 5-years, the $300,000 mortgage could be reduced to $279,000, adding $21,000 to your net worth!

But if laying out the initial increase in monthly payment and having to wait for your tax benefit to show up next April is a tough nut to crack, the IRS wants to help. Instead of waiting to file for the tax benefits derived from your new home purchase, you can simply adjust the amount of your withholding. This allows you to have less tax withheld from each paycheck so you can handle the new mortgage payment more comfortably throughout the year. In essence, you are taking your tax refund as you go instead of letting Uncle Sam hold it all year, interest free.  

As you can see, it makes sense to own a home rather than rent one! If you are ready to proceed, click on the arrow below to learn about financing options. 

Congratulations on your decision to purchase a home! If you are looking for assistance with your first home purchase, looking to up-size or downsize, or are looking for an investment property, you have come to the right place!  Please call me to arrange a consultation with my team. We can help you all phases of your purchase, from showing you your home to referring you to financing.

Ron Denhaan - Realtor Realty One Group (949) 290-3263 ronforhomes@gmail.com DRE# 01728866