Now looks like a great time to upgrade from renting to buying. Zillow predicts a rise in rental rates of 3.2% over the next year in Charlotte. This is well above the nation’s average of 1.7%. With interest rates remaining at historic lows, what have you got to lose?
If you are still on the fence, here are some advantages and disadvantages of buying a home you might want to consider.
Advantages:
- Greater Privacy. Buying a home, unless it’s a condo or townhome, means you don’t share walls with anyone. This can be great if you want to play loud music, host a dinner, or just have a dance party. This also means fewer restrictions on pets, children, number of cars, etc.
- Investment. Typically, homes increase in value over time building equity. This can make for a great nest egg for the future, or to help you move up to a bigger home from a starter home. If you pay your mortgage in a timely manner, it can also boost your credit score.
- Stability of costs. If you have a fixed-rate mortgage, your costs are much more predictable with no hikes in rent. You may still have fluctuations in utilities and taxes.
- Tax advantages. The mortgage interest and property tax portions of your mortgage are tax deductible. This can mean the difference between owing taxes and getting a refund. Because mortgages are front loaded with interest, you typically have the largest tax write off in the first years you have a mortgage with deductions diminishing each year until you fully pay off the mortgage.
- Community ties. A mortgage is a long-term commitment, typically 30 years, and can help tie you to your community more tightly than renting. Renters can be more transient as the commitment is typically for 1 year.
- Personalization. You can paint the walls whatever color you like, heck, you can take out walls or build new ones. When you own, you have much greater freedom to upgrade you home from upgrading, to updating, to changing completely.
- Second income stream. When you own a home, you have the potential to rent out a room, make your home a vacation rental, or buy a duplex and rent out half. There are many ways to have someone else help pay your mortgage.
Disadvantages:
- Commitment. It is much harder to sell a home than break a lease. This makes it harder to move to another city.
- Maintenance. When you own, there is no landlord to take care of a leaky toilet or broken air conditioner.
- Expense. Typically buying your first home requires a down payment, closing costs and moving expenses. This is usually much higher than security deposit and first month’s rent for a lease agreement.
- Investment. Any investment carries some risk. Your home may not appreciate much in value, especially in the first few years. It can take 3-5 years in a mortgage to come out ahead compared with renting.
If you think you are ready to take the plunge into homeownership, one of our Realtors would love to work with you.