It's Completely Yours
One of the main reasons why you should buy instead of rent is that at the end of each day the home is completely yours to do with as you wish. You may have to take out a rather large home loan but it’s worth it! Every mortgage payment you make means you are one step closer to total ownership while building equity.
Nothing compares to the personalization and privacy that comes with owning your own home. In your own home you can have pets, build a greenhouse garden, host huge Thanksgiving dinners or that Saturday garage sale to declutter your new space. The opportunities are endless when you buy instead of rent.
Even the little things like hanging up family photos or mounting a TV above the fireplace are much easier when you don’t have to worry about leases and losing your security deposit. When you have your own place it becomes more than just a house, you can make it a home.
Remodeling Can Offer Benefits
Remodeling can improve the quality of your home and your life! Have you been wanting a kitchen equipped for a chef or a finished basement for your kids? Renovations can make your home life more enjoyable while increasing your homes value, making it worth more at resale.
These are particular renovations that will definitely increase the value of your home:
- Central Air
- Updated Appliances
Basic upgrades will also help with resale value. You can also get tax deductions by making some pretty specific home improvements (for example, although painting is fun and easy, the cost of paint isn’t deductible). You can get an energy-efficient federal tax credit of 30 percent of the cost of qualifying energy generating systems, like solar panels, solar water heaters, and small wind turbines. Not only can you saves on taxes but you can enjoy lower energy bills as well.
Renovations Help Sell Your Home
Two years ago you purchased your first starter home and now you need a bigger place to fit your family, the renovations you made can help save you money! When it comes time to sell, the improvements you made on your home can get you a tax break and save you some serious money.
If you make significant improvements to your home that allow you to sell it for a lot more than you bought it for, you can save on the taxes you have to pay on your capital gains. Think of capital gains as a profit — it’s the sale price of your home minus the cost basis.
Capital gains = sale price + cost basis (purchase price + improvements)
If you live in your home for at least two years before you sell, you can avoid capital gains taxes on up to $500,000 (or $250,000 if single or filing separately) of the profit you make. For example:
You buy a home for $300,000
You put $50,000 of renovations in, making the total amount you put into your house (cost basis) $350,000
After two years of living there, you sell it for $500,000
You make a profit of $150,000 and won’t have to pay capital gains taxes on it. Sweet deal! In short, improvements raise your cost basis and can reduce capital gains tax when you sell.
Equity is Awesome
Buying a home is a smart way to increase your personal weather. Bit by bit as you pay off the principle of your loan you are building equity. Another reason buying is better than renting: the rent you’re paying doesn’t accrue equity and you will never see that money again.
Equity is the difference between the market value of your home and the outstanding balance on your loan. To put it into simpler terms, it’s the value your home builds over time.
For example, say you bought your home for $400,000. You paid $20,000 as a down payment, and take out a loan of $380,000 to cover the rest. So your down payment is your equity.
Home purchase price ($400,000) – amount owed ($380,000) = equity ($20,000)
Say after five years of making your monthly mortgage payments, you’ve paid down $25,000, making what you now owe $355,000. But then, you have your home appraised and find out that it’s increased in value, and it’s now worth $500,000. Awesome!
Home’s current appraised value ($600,000) – amount owed ($355,000) = equity ($245,000)
Since your home increased in value and you were making monthly payments, your equity has grown. You can take out a home equity loan or line of credit using your gains for cash to pay for a variety of major costs, for instance: medical bills, home improvements, college tuition or a car.
Cost of Living is Locked In
Remember the time you rented that amazing apartment you loved so much, and just as you were ready to renew your lease, you got a letter saying the rent was increasing? Not having a rent-controlled living arrangement can really cost you.
Since the U.S. housing bust, annual rent increases typically outpace inflation, due to the huge rental demand. In 2013, rent went up by an average of 4.6 percent (inflation in 2013 was 1.5 percent). In high-demand cities like San Francisco or New York, rent can increase a lot higher than the national average.
Because of this, owning your own home instead of renting acts as a hedge against inflation. When you have a fixed-rate mortgage, your monthly payment stays the same every year, even if interest rates are skyrocketing around you. No surprises here.
Potential to Increase Disposable Income
Now that you own your home, it locks in your cost of living, paying down a fixed-rate mortgage (with the same payments every month) can actually increase your disposable income if you get a small raise at work each year.
Let’s say $20 of every $100 you make is disposable income
Now say you get a 3 percent raise
Your disposable income goes up $3 for every $100 because, unlike rent, your mortgage payment doesn’t increase
More money in your bank account!
Let's Talk About the Tax Breaks
Another great thing that comes with owning a home are the takes breaks that come along with it. Becoming a new homeowner will require you to fill out a few extra forms come tax time but it certainly pays off.
The greatest savings will come from mortgage interest tax breaks, this is what most homeowners save money on come tax season. In January, your lender should tell you how much interest you paid during the previous year on your home mortgage.
If you’re not sure where to file your taxes. TurboTax lays out plain and simple exactly what counts as mortgage interest and how much you can deduct.
Mortgage Point Deductions
Do you plan on paying your lender for points to get your home mortgage at a lower interest rate? If you choose to do this at closing, you can usually get a return in the year that you purchase your home. Even if the seller ends up paying for the points, the buyer gets the deduction.
How significant can these mortgage point breaks be? If you’re eligible to get a return in that first year of ownership, you can just add the amount to your mortgage interest deduction. So if you paid $3,000 in mortgage points, you can increase your interest deduction by $3,000. Pretty cool.
If you refinance, you can’t get the deduction in the year that you paid them. However, you can still deduct them over the repayment period. If you paid $3,000 in points and have a 30-year mortgage (360 payments), you can deduct $100 [($3,000/360) x 12] each year. Still pretty cool.
Ready to Buy?
Owning your our home opens the door to many possibilities, the biggest is creating new memories together as a family. At Visionary Homes we believe a home is meant for living and we are ready to help you purchase the home of your dreams. Visit one of our beautiful model homes, award winning design studio, or give us a call at (435) 228-4702 to begin your home buying journey today!