Buying vs. Renting: Which is Better?

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What are the biggest differences in owning a home vs. renting a home? If you are procrastinating home ownership, then you might be missing out on important financial benefits for your family. Here are a few things that change when you buy a home:

Financial Benefits of Home Ownership

Even though owning a home is perceived as an expensive purchase, there are real financial benefits available. Today I want to specifically look at interest deductions and the money that you could be putting into savings for the future.

The average loan in the area is about $350,000. As a homeowner with a loan of this size, you are paying about $480 per month towards your balance. That means that you are paying $5,760 per year to pay down the mortgage. This money is basically like a savings account since you have equity in the property.

The rest of the monthly payment goes towards mortgage interest, which is tax deductible. Annually, you pay about $15,540 in mortgage interest. If we assume that you are in a 25% tax bracket, then it means that you are going to save another $3,885 each year in tax savings. This mortgage interest write-off results in taxes that you don’t need to pay the government.

Do the Math on Buying a Home

Let’s take this scenario one step further and run the math on this hypothetical situation. Owning a home means that you will save about $800 per month. If you are renting a home, then none of your monthly payments will have a positive benefit on your finances. These numbers are assuming that everything else is equal in the total payments that you are making for the mortgage or rent.

Keep in mind that home ownership means that you will need to pay for repairs occasionally. But, having an extra $800 per month can put a dent in any repairs that might come up.

If you need help comparing home ownership to renting a home, then you are welcome to call, text, or send me an email anytime. I am always happy to answer your questions about real estate in Temecula: (951) 473-0390 or [email protected]