Many millennials are starting 2016 with new goals… some of those goals include making a move.
The question then arises, should I rent or should I buy?
We found this advice on money.usnews.com and thought we’d share it below. See the full article here.
Here are six reasons buying a home or condo makes better financial sense than continuing to rent.
You’ll spend smarter. Rent payments go straight into the pocket of the landlord – and at the beginning of the next month, you’ve got nothing to show for it.
But mortgage payments are an investment in the future, says Tony Via, an assistant finance professor at Kent State University in Ohio. As the remaining balance on a mortgage is reduced, home equity increases, padding your own retirement account – and not your landlord’s. Better to spend your money on your own home than on unnecessary, short-term expenses that won’t provide value later, he says.
Consider the resale value. Property in solid markets such as New York, Miami or San Francisco is a good investment because those areas attract professionals who want to be there for a long time. Buying in areas where the market is trending up can increase net worth, Ravasini says.
Home prices in the Big Apple doubled between 1990 and 2000 and again between 2000 and 2012. The Standard & Poor’s 500 index saw a huge 315 percent increase from 1990 to 2000, but only a 14 percent rise from 2010 to 2012.
Enjoy the tax breaks. Mortgage interest is deductible from your income tax, lowering your tax burden to Uncle Sam. And homeowners usually don’t have to pay a capital gains tax when they sell if the property value increases by less than $250,000 and if the home has been occupied as a primary residence for more than two years. That’s a benefit that trumps even a very good IRA or other tax-deferred retirement plan, Via says.
Homeownership has emotional benefits. Homeowners are more likely to be invested in the local community and develop interpersonal relationships that create a reliable support system than those who rent.
“Although it is not a primary benefit for millennial homebuyers, there is also a sense of pride that homeownership invokes,” says Mike Hardwick, president of Tennessee-based Churchill Mortgage. “Through the investment of a home purchase, millennials can play a key role in restoring faith in the American dream and preserving it for decades to come.”
Low interest rates. Borrowing to buy a place to live is seen by banks as a much safer investment than credit cards, and interest rates are still at rock bottom [still historically low]. “It is hard to qualify mortgage debt as a bad financial decision these days,” Via says.
Supplement your retirement income. As millennials contemplate buying homes, Via says they should think about the future. They’ll benefit from having a home as a storehouse for retirement funds, and their homes will likely be paid off by retirement, allowing them to tap into home equity to fund retirement benefits.