Owning a home can be terrifying. We’ve outlined the drawbacks of renting so you can decide with confidence if you’re on the fence about it. Wouldn’t it be nice to have a fence around your own yard while we’re on the subject of fences?
The 5 Disadvantages of Renting A Home Or An Apartment
Renting has definite drawbacks, such as upstairs neighbors who also moonlight as professional cloggers and rent that increases more quickly than the undead. Everyone has different motivations for buying a home, but we’ve compiled a list of five significant drawbacks of renting that we’re willing to bet you can identify with.
You’re not the only one if reading that list made your skin crawl. Let’s examine each drawback of renting a home or apartment in greater detail, and while we’re at it, let’s dispel some myths about mortgages.
Unable to Raise Credit Score
While your track record of on-time rent payments is commendable, it has no bearing on your credit score (unless you pay a fee to have it reported to credit bureaus).
On the other hand, paying off your mortgage can help you improve your credit. When the time comes to refinance, you can take advantage of the rising value of your credit score to obtain better terms or a different type of mortgage.
Lack of Ability to Increase Equity
Though the cost of rent per month may be less than that of a mortgage (or it may not), what are those payments used for? No end is in sight when you rent. In fact, every time your lease is renewed, your rent will probably go up. Furthermore, that money goes toward your landlord’s mortgage, neighborhood repairs that will be cited as a reason to increase your rent, and the maintenance of amenities you might not even use.
With mortgage payments, youâ€™re building equity. Equity is the amount of your home you actually own, i.e., how much of your mortgage youâ€™ve paid off. So, every payment not only gets you closer to owning your home but also builds equity. That equity can be leveraged when you refinance your loan or sell your house down the line.
Absence of Stability
Lack of stability is yet another drawback of renting a home or apartment. You probably renew your lease every 6 to 15 months, and each time the rent goes up. You’ll be looking at mortgage terms of between 10 and 30 years. If you choose a fixed-rate mortgage, you can count on paying the same amount each month until your loan is paid off or you refinance for a new rate and term.
It might be time to consider purchasing a home if you’re sick of expensive pet policies, constrained decor options, and all the other neighborhood rules that come with renting. Even though there may still be a HOA, you will have much more control over the furnishings, landscaping, and general layout of your space. When you own a home, you also have more control over the neighborhood you choose to live in, whether you’re looking for LGBTQ-friendly communities, places with engaging educational opportunities that meet the needs of your children, or a dog-friendly area for the furrier members of your family.
There Are no Tax Advantages
Taxes can be complicated, but one straightforward fact about them is that you are eligible for write-offs if you own your home, whereas you are not if you rent. These are some of the most frequent tax benefits for homeowners, though you might not be eligible for all of them:
Interest on a Mortgage
Despite the fact that you can write off interest costs when you file your taxes, you might view interest rates as a reason to put off buying a home. For the first $750,000 of your mortgage, you can deduct the interest you paid. The entire IRS description of how it functions is available here.
Points on your mortgage are essentially pre-paid interest. The option to buy these points to get a lower interest rate will be available to you when you apply for your home loan. Your mortgage’s points are deducted as an itemized deduction when you file your taxes; each point represents one percent of your loan.
Real Estate Taxes
You must pay both state and local property taxes if you own a home. You are allowed to deduct up to $10,000 in property taxes if you file jointly with your spouse. If you file as an individual, you are allowed a $5,000 deduction.
Deduction for Home Offices
If you are self-employed and run your business from home, you are only eligible for deductions for home office expenses. You cannot claim those expenses as a tax deduction if you work from home but are not self-employed.
Upgrades to the Home
This deduction only applies to medically necessary home improvements (sorry but renovating your attic because it’s too creepy does not qualify). This includes modifications such as installing ramps, widening doorways, and lowering counters for accessibility.
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