February 02, 2016
With the rising cost of rental properties in Nevada and low, homebuyer-friendly mortgage rates, the answer to the age-old question, ‘to rent or to buy?’ may be decidedly more clear than in years past. But is homeownership right for you? Your pocketbook? Your lifestyle? Your future? Let’s tackle the question(s) at hand.
We Are Pro-Homebuying, Mostly
Admittedly, the Nevada Housing Division is a fan of Nevadans buying homes. It’s our mission, our passion, our raison d’être to help provide affordable housing opportunities and improve the quality of life for Nevada residents. In doing so, we are revitalizing neighborhoods and strengthening communities throughout the state. That being said, buying a house isn’t for everyone all the time. Here, we’ll lay out a couple of the pros of buying, and on the flip side, the pros of renting—it’s just the right thing to do.
Homebuying Pro #1 – That Whole Money Thing
As you already know, buying a home in most cases is more financially beneficial than renting. What you may not know is that a mortgage is often less expensive than rent. A recent article on Forbes.com further explains. “Over time, as the interest portion of your mortgage payment decreases, the interest you pay will eventually be lower than the rent you would have been paying.”
Also noteworthy is that when interest rates rise, and they’re bound to, the payment on a fixed interest rate loan will stay put. Rent prices often rise with interest rates—one of many factors that can affect rent prices.
And then there’s the fact that owning a home increases the homeowner’s overall net worth. That’s because you’re building equity, aka, “the difference between the current fair market value of the property and the amount the owner still owes on the mortgage,” as defined by investopedia.com. When a person pays rent instead of a mortgage, the money doesn’t benefit them beyond the month paid for.
The Flip Side: According to the rent-or-buy tool on realtor.com, buying a home can prove to be cheaper after the 4-year mark in certain Nevada markets.
Homebuying Pro #2 – Hello, Tax Benefits
Though homeowners must pay property tax and mortgage interest, both are tax deductible come April 15. Legally. That certainly helps offset the cost of purchasing a home. Other potential tax benefits include the ability to earn credits for energy-efficient upgrades to the property.
The Flip Side: Renters don’t pay property tax, mortgage interest, homeowners insurance, home warranty or HOA fees in the first place. (Be advised, landlords are no dummies. They usually build those costs into the price of your rent.)
Homebuying Pro #3 – Your House, Your Rules
Owning a home, unlike renting, gives you the freedom to paint walls whatever mood-enhancing color you want, tear down walls for that open concept you’ve dreamt about, or even upgrade the kitchen so you can really start cookin’. Heck, you can even put holes in the walls without losing your deposit—‘cause there isn’t one. Though this particular pro isn’t based on a financial benefit, it is important because people feel more at home when it’s actually theirs. You can’t put a price on that.
The Flip Side: Renters have no financial obligation to repair or maintain the property. If the water heater breaks, it’s the landlord’s problem. End of story.
Homebuying Pro #4 — Your Roots Can Take Hold
Also on the emotional side of homeownership is the security that comes with firmly planted roots. Thanks to a more permanent place to hang your hat, people tend to feel a sense of stability, not to mention a sense of accomplishment since buying a home is one of life’s big achievements. And for children (current or future), knowing there’s less of a chance of changing homes, neighborhoods and schools is very reassuring.
The Flip Side: Renters can relocate more nimbly than homeowners. Got a new job across town but don’t want the long commute? Looking for a bigger pad? A room with a view? Since lease agreements typically only require one month’s notice to move out (usually after a predetermined timeframe), it’s a simpler endeavor to change addresses.
Opportunity Is Knocking Loudly
If it’s sticker shock that’s keeping you from considering homeownership, we invite you to explore the homebuying programs offered by the Nevada Housing Division. We offer several, though our most popular is the Home Is Possible Program. The Home Is Possible program gives low and middle income homebuyers free money—as much as 5% of the loan value. So if you can cover the monthly mortgage but are having trouble with the upfront costs, this free money can be applied toward either the down payment or closing costs. The best part? It never has to be repaid; it’s a gift.
Here’s the bottom line: if you like your general location and don’t expect to move anytime soon, the current housing market points rather clearly to purchasing a home. If your five-ish year plan doesn’t include where you want to settle down, renting could be a good short-term option. Whichever you decide, it’s important to weigh the pros and cons of each option, and explore the opportunities before you—including homebuyer programs offered by Nevada Housing Division and backed by the State of Nevada.