People are renters for various reasons. They may not be interested in owning a home because of the cost and effort involved in maintaining a home. Perhaps a person doesn’t have the down payment necessary for a home purchase. Maybe personal plans call for a very short stay and a home purchase really isn’t practical.
If you are still renting, here are some facts to consider:
THE PRESENT REAL ESTATE MARKET – Though everyone is talking about how much homes have appreciated during the “COVID market,” conditions have not been this good for buying a home in recent memory. Yes, we have seen significant appreciation this year, so have rental prices risen greatly! With continued low interest rates and rising rent prices, many current renters are discovering that you can literally buy a home cheaper than you can rent! You have heard it said that timing is everything; this is certainly the time to buy!
DOWN PAYMENT SOURCES – If you are a first-time buyer, the State of Illinois from time to time releases special grants to help first-time buyers get started. Many lenders have access to these grants and they’re something that you should discuss with them before you “lock-in” with them. Another great source could be the “Bank of Mom and Dad!” Though you are now out on your own and want to show your independence, most parents who are able and want to help their children get started. I could not have bought my first home at age 20 without my parents help, and my wife and I were thrilled to be able to assist our two children purchase their first homes as well.
TAX ADVANTAGES – Since the tax revisions of 1986, the only sizable tax deduction remaining are the mortgage interest and property taxes paid as a result of owning and financing a home. The monthly rent check that goes to the landlord could actually be partially returned by a tax deduction if the same amount went to make a mortgage loan payment instead of rent. If a rent payment is $1,500 per month, as an example, someone in the 25% tax bracket would receive $375 back in a federal tax return if the payment was not for rent, but mortgage interest and property taxes.
A FORCED SAVINGS ACCOUNT – It is very difficult for anyone to save money. A homeowner, however, saves money every time a mortgage payment is made. The principal amount of the mortgage loan is reduced with each payment; thus reducing the amount owed and increasing the amount that will go to the owner upon sale of the property. If the home is located in an area of increasing values, the passage of time continues to inflate the amount of profit the owner will realize when it is time to sell.
ADVICE: If you are currently renting and before it is time to renew your lease, contact a Realtor® in your area to investigate your situation. This may be the time for you to get a firm financial footing and take a big step into home ownership.