The rent is just too high! That’s why many people in Albuquerque find that owning a home makes more sense financially and in terms of lifestyle than renting. Even though it’s a seller’s market and homes may cost more than they have in the last couple of years, owning a home still makes sense over renting. These are some of the top reasons why people choose to buy versus rent in Albuquerque.
It’s Yours – Do What You Want
The biggest advantage of owning your own home in Albuquerque is that you can paint the kid’s room however you want, change the flooring from carpet to hardwood, and install a chandelier without asking the landlord permission. Sometimes, you will also increase your property’s value by making these home improvements.
It is easier for many people to understand investing in a home than stocks, since owning a home provides a tangible benefit to their everyday lives. Investing in real estate also has significant financial benefits, which are often more substantial than those of investing in stocks. Since you get the appreciation on the entire home’s value, not just the gain on your down payment, a home appreciates more rapidly than stocks.
For instance, if you invested $30,000 in stock and it appreciated 3 percent per year for three years, you have gained $2,782 on top of the $30,000 you invested – and if you sold it, you’d have to pay taxes on that gain. If you buy a $300,000 primary residence with a $30,000 down payment (representing 10 percent down) and it appreciated 3 percent per year for three years, you’ve gained $27,818 on top of your $30,000 invested — and if you sold, you’d be exempt from paying any taxes on that money gained.
When homeowners file their tax returns, they can deduct mortgage interest and property taxes. Using the same example of $300,000 home purchase with 10 percent down, a mortgage calculator shows a total monthly housing cost of about $1,731, with $1,231 in principal and interest (using a rate of 3.625 percent), $300 in property taxes, insurance of $67, and mortgage insurance (required when putting less than 20 percent down) of $133. For every $1,731 in total housing expenses, homeowners can deduct $335 in mortgage interest and property taxes, so this results in an after-tax housing cost of $1,396. Owning becomes cheaper or equal to renting due to significant savings from tax benefits.
With a fixed-rate mortgage, your mortgage payment will never change. Every year, rent will rise for renters in non-rent-controlled buildings or neighborhoods. The majority of the owner’s housing payment is made up of mortgage payments, which creates a lot of financial stability. Other costs include homeowner’s insurance (though renters do not need insurance the way homeowners do), and that fee can vary year-to-year. Even though owners have property taxes that renters do not, and property taxes are subject to increases with the appreciation of a house, this fee is tax deductible.
Every time a homeowner makes a mortgage payment, a portion of that payment is put towards paying it down, increasing the equity in the home. Using the example of a $300,000 home purchase with 10 percent down, the average pay-down per month in the first year is $423, and the average in the second year is $438, and the average pay-down per month keeps rising each year. This loan pay-down each month is required as part of the mortgage payment, but it’s the owner being required to invest in their own home, so it’s like forced savings that benefits the owner — whereas the entire portion of a renter’s monthly payment is going to a landlord.
If you feel it’s time to take control of your living situation and own a home in Albuquerque, we can help. Contact Sandi Pressley today to see how you can go from renting to owning a piece of the American dream.