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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6 Ways Buyers Can Save on Their Mortgage

Photo Credits: Kindel Media With mortgage rates on the rise, it’s easy to feel extra financial stress when buying a new home. In the past month, mortgage rates have hovered around 7%. They are predicted to fall in the second half of the year, but affordability continues to be an issue when buying a home. Here are 6 ways homebuyers can save on their mortgage and afford their dream home.   Shop around: Credit: Alena DarmelTens of thousands of dollars can be saved from shopping around and getting quotes from multiple different mortgage lenders. Different lenders have different qualifications and standards used when deciding who to lend money to, which is why the exact same person can get such different quotes from other lenders. Make sure you get at least two different quotes, but keep in mind that buyers who get five or more quotes can save almost three times as much money over the lifetime of their loan then those who get two quotes.    Negotiate:While you may know it's standard to negotiate the price of your new home if necessary, many people do not consider negotiating a mortgage rate. The amount of room to negotiate a mortgage can depend on the lender but some lenders will consider negotiating on either the rate or the closing costs. One way to improve your negotiation is to show quotes from other lenders and ask for a better rate from them in order to keep your business. Do not be afraid to ask for a better rate, it never hurts to ask!   Buy down the mortgage points:Mortgage points are a type of prepaid interest, meaning you can choose to pay more upfront and receive lower interest rates and monthly payments. The downside to this is that it costs more upfront; however, if you have the money to pay extra to buy down mortgage points you can save money in the long run. When considering whether buying down mortgage points is for you, ensure you have enough money saved that spending the extra money on points will not deplete your savings past a point you are comfortable with.   Ask for discounts: Few people know that banks can sometimes offer “relationship discounts” to customers that already bank with them. These discounts can include waiving the loan processing fee or a certain percentage off of your loan. Ask your bank if they offer any relationship discounts before you sign your mortgage!   Watch out for float-down policies: A float-down option in a mortgage allows the borrower to adjust their rate downward if mortgage rates decrease during the closing timeline. Different lenders have different rules regarding their float-down policy, so make sure you ask what your lenders are before you have locked down your mortgage with them. Some policies include charging a percentage of your loan amount as a fee if you switch to a lower rate. Educate yourself on the float-down policy for the different lenders you are considering!   Consider the terms: Although a 30-year mortgage is the most common length for homebuyers, a 40-year mortgage may also be offered by some lenders. A longer loan saves you money on your monthly payments, but you will likely be paying more interest in the long term. You also may be able to get an adjustable-rate mortgage, which starts with a lower interest rate and then resets to the current rate every 5 to 7 years. Refinancing a loan down the road when there are lower interest rates is another thing to consider. 

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Why Fall is a Great Time to Sell A Home

Credit: Vlada Karpovich Fall is just around the corner in Boise. The leaves begin to change and the fall smells fill the air. Although the spring market is always spoken about as the best time to sell a home, at Lysi Bishop Real Estate we find the Fall market to be one of our favorites.   Serious buyers are in the market: Many buyers sense the change in season and want to nest just in time for the holidays. This can work to your advantage as a seller because the buyers looking at your home will feel an urgency to choose to move in before the snow hits.   Autumn can add ambiance to your home: Fall colors can make a house feel homey and cozy. Autumn smells in the air and a fireplace going can help buyers envision themselves living in your home. Trees full of leaves changing color can also add to the curb appeal of your home! Just make sure to keep leaves on the ground raked and the gutters clear.    Less competition: With fewer homes for sale in the fall, your home has a better chance of standing out.  Quicker sales can occur because businesses such as home inspectors and mortgage lenders will have fewer customers, and therefore be able to prioritize your home more. This is a major advantage with the fall market!  

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