Why pay your landlords rent when you can be a homeowner?

Rent or Buy? ø The Choice Is Yours

If you know you can afford to spend $750 per month rent you could easily be building equity in your own home rather than paying down your landlord's mortgage.

• You don't need a huge deposit (you may not need ANY deposit)
• You don't need perfect credit
• You don't need a high income

There are many things to consider when buying a home. For most people, their home purchase is the most expensive purchase of their life so it is not something to undertake lightly. If you are currently renting, you need to know about the many advantages of home ownership and how they apply to your current situation. You also need to know what price home you can afford? And do current market conditions favor buying a home?

Renting vs. Buying ø Compare the costs

On the face of it, this seems a simple enough task but as is often the case, there is more to it than meets the eye. Compare the cost of buying or renting the same home. Let's take a $150,000 home that could rent out at say $750 per month.

Rental costs are easy - $750 per month. But remember that this figure is not set in stone. When your lease runs out your landlord may well want to increase your rent. On average, rents tend to go up by 4-5% per year.

If you were to buy a $150,000 home with a 100% mortgage, the payments would be much higher than the rent we mentioned ø maybe more like $900 per month depending on how the loan is structured and what interest rate you pay. But there is more to it than that! Don't forget that you should be able to claim tax relief on the interest you pay. And in the early years of a mortgage it is mostly all interest that you pay.

Uncle Sam Will Help You Pay Your Mortgage

Assuming you are paying income tax at the 25% rate, the government will credit you back 25% of the interest you pay over the year. 25% of $900 per month is $225, which brings your net payment down to $675 ø less than the rent payment!

Other Considerations

There are other costs you need to consider when buying a home though. You will also have property taxes to pay (assume an annual cost of around 1 to 1.25% of the purchase cost of your home in this area. Also fully tax deductible). You may have homeowners association dues and you will certainly have to pay the cost of maintaining your home.

On the plus side, the value of a home can generally increase significantly during the years that you own it. This increase in value builds your equity with no effort on your part. Of course you can also choose to increase the value by making improvements to the home over time.

A further benefit to home ownership is that you are not responsible to your landlord. Nobody can tell you what you can and can not do in your own home. You also have the security of having a place to live as long as you keep up your mortgage payments, and the knowledge that you are building an asset for your retirement and perhaps for your children's future.

The Next Step

If you want to get an initial idea of how much home you can afford, complete the short form below and drop it off at our office. If you are already convinced that you want to stop paying your landlord's mortgage, you now need to get pre-approved for a loan. Call us at (906) 643-9242 or send us an email and we will introduce you to the right mortgage specialist to handle your needs. There are many loan programs out there including zero down, interest only loans and much more. Make the next move NOW and stop pouring your rent money down the drain!