Pros and Cons: Homeownership vs. Renting

Buying a home is one of the biggest financial commitments a person can make. Homeownership has a myriad of benefits and is a big step in building wealth. Nevertheless, it is important to consider if your current needs align with homeownership, or if you want to wait to take this step. Explore the benefits and drawbacks of homeownership and renting to make an informed decision on which option fits your lifestyle and goals!   Benefits of Homeownership: Long-Term Investment: Historically, home values increase over the years. While it is impossible to say for sure, it is highly probable that buying a home will yield positive returns on investment. Building Equity: Paying off your mortgage builds up the amount of the home you own, which is the equity you have in your home. When selling your home, your profits will increase as the amount you have paid off increases.  Federal Tax Benefits: Mortgage interest is deductible on the first $750,000 spent on your home. Additionally, upon selling the home, you can be exempt from paying capital gains tax on the profit, up to $250,000 for single filers and $500,000 for married taxpayers. Stable Monthly Payments: If you finance your home with a fixed-rate mortgage, you will have the same monthly payments for the entirety of your mortgage. This predictability is advantageous in comparison to renting, where you will likely see rent increases over time. Privacy & Personal Preference: Homeownership allows you to make changes where you see fit. Whether you want to change the color of the walls, add an extra room, or get a dog, you have the freedom that many renters do not. Single-family homes provide more privacy without shared walls or outdoor spaces. Community: As a homeowner, you join a neighborhood in a permanent way. This allows you to put down roots, connect with the people in your community, and have a sense of belonging.   Drawbacks to Homeownership: Higher Upfront Costs: Closing costs on mortgages, property taxes, home inspections, and insurance costs can make the beginning stages of homeownership costly. However, these costs are typically recovered in 5 years.  Less Flexibility: Owning a home can make relocating and changing circumstances more of a challenge than renting. When buying a home, ask yourself if you can picture yourself in this home for at least the next three to five years in order to get the optimal return on your investment.  Maintenance Costs: As a homeowner, it is your responsibility to cover maintenance costs. However, repairs and maintenance are investments in the value of your home and could pay off when selling your home.   Benefits of Renting: Flexibility: Leases typically last a year, making it much easier to move when life presents circumstances like a new job offer or family changes. You won’t have to prepare your home to sell or rent and can simply clean up and move out. Little to No Maintenance: Landlords are responsible for most maintenance costs and repairs, lifting the responsibility off of you. When something is not working or needs replacement, it can be a big hit when owning a home to pay for it.   Drawbacks to Renting: Rent payments don’t build equity: Your rent payments help your landlord pay their mortgage and don’t help you build your personal wealth in equity. In comparison, mortgage payments help you build equity in the home, leading to a much larger payoff over time.  Rent may increase: Rent is almost always increasing from year to year, while mortgage payments are typically fixed and do not change. Limitations: Renting can be limiting to what changes you can make to the property, how many people can live with you, and if animals are allowed. If you have a family or furry friends, this can add extra stress and, in some cases, an additional expense.

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Choosing the Right Neighborhood for You

Neighborhoods are more than just a collection of houses. They are the place where you will establish roots and foster community. Educating yourself about the neighborhood prior to purchasing a home is crucial to making a well-informed decision. Explore your potential neighborhood by driving or walking around, joining an online Facebook or Nextdoor group dedicated to the neighborhood, or visiting local coffee shops and restaurants. Additionally, your real estate agent will have extensive knowledge of different neighborhoods so you can identify your perfect match.   What’s Your Budget: While home values are individual to each property, neighborhoods have a large influence on the overall value of a property. You will want to start your search efforts on neighborhoods that fit within your specific budget and then branch out into lifestyle and proximity factors. Some neighborhoods may be valued higher due to proximity to attractions, like foothills or the river.   Consider Your Lifestyle: Are you an avid mountain biker and want access to trails without having to load the car? Do you want a neighborhood pool to splash in all summer? Lifestyle choices such as these are important to consider. Envision yourself living in the neighborhood you are considering: Is there a nearby park? Is there a grocery store around the corner for those last-minute milk runs? Is it close to restaurants and entertainment? Consider the amenities you value being close to, and ensure the neighborhood you choose aligns with these desires.    Proximity to Schools: For parents or those planning to start a family, the quality of school systems is significant when choosing a neighborhood. Even for those without children, a home in a sought-after school district raises property value. There are many online resources to get information about the quality of schools in your potential neighborhood. Look at the National Center for Education Statistics or Great Schools for information.   Proximity to Work/Hospitals/Etc: Consider how close a neighborhood is to your place of work and other services you may regularly need (like hospital visits, beauty services, daycares, etc). You may find that a neighborhood could be more appealing if these services are easily accessible.   Check out these popular areas in Boise! Thinking about relocating to the Treasure Valley? Learn more and receive our free guide here!   The North End   Northeast Boise   The Highlands   The East End   Southeast Boise   Downtown Boise   The Bench

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Common Real Estate Myths Debunked

The world of real estate is riddled with myths that can leave both buyers and sellers feeling overwhelmed and confused. In an industry where every decision involves significant financial implications, it's important to distinguish between myths and facts. Whether you're a first-time homebuyer or simply curious about the housing market, understanding the truth behind these myths can save you time, money, and stress.   You need 20% down to buy a house. Contrary to common belief, putting 20% down when buying a home is not required. With a 20% down payment, lenders will not require mortgage insurance, which protects the lender if you cannot pay your mortgage. However, you can put as little as 3.5% down on a home through programs such as FHA mortgages. Do not let this misconception stop you from buying a home!   Buy the nicest house in the cheapest neighborhood. This piece of advice gets thrown around a lot in the real estate world, and it does not hold a lot of truth. Buying the nicest home in an affordable neighborhood can make it much harder to sell down the road. The nicest home in a neighborhood may also have very little room for adding value, while an average home will see improvements that add much more value. Lastly, the neighborhood may not improve, and you are likely to see a bigger increase in value from buying a less expensive home in a nicer neighborhood.   Working with a realtor is a waste of money. Many people underestimate the value of a real estate agent. Whether you are buying or selling a home, a real estate agent has the expertise and experience to get you the best deal and make the process as smooth as possible. The facts speak for themselves: an independent study in 2016 found that homes for sale by owner sold for 5.5% less than agent-assisted sales. When it comes to buying a home, agents have access to MLS, professional negotiating skills, professional contractor relationships, an objective viewpoint, and years of experience to guide you toward your dream home.   Getting pre-approved for a mortgage will hurt your credit. Many people believe that getting pre-approved by a lender will hurt or even ruin their credit score. The truth is, getting prequalified is considered a “soft hit” and has minimal impact on your credit score. Applying for a pre-approval does cause a hard pull on your credit score, which will drop it from one to five points. If multiple pre-approval applications are submitted in a short period of time (typically two weeks), it will likely only count as one hard pull on your credit. If you are shopping around for a mortgage, ensure applications are done in a short period of time to limit the impact on your credit.

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