Renting short-term is sometimes necessary and even beneficial, especially if your credit needs some TLC or if you are unsure where you want to live. With that being said, whether your monthly payment is going to a landlord or a mortgage company directly, you are paying someone’s mortgage. Housing in Northern Arizona is a common gripe among renters and homeowners alike, but if you are serious about your finances, you will want to own your home.
It is a long-held, traditional belief that houses are for living in and apartments are for renting as a cheaper option. Homes now fill many niches, whether living in them full time, part time or as pure investment. They fill needs as temporary, as a one-night Airbnb stay, to the still temporary four-year investment while a child is in school, to the rare “permanent home for life” that we were raised to view as our optimal goal as an adult. These changes in what we use homes for have both positive and negative connotations, depending on your situation and your needs. As for Northern Arizona and Flagstaff specifically, it is common to pay the same or even less for a two-bedroom home mortgage as you pay to rent a two-bedroom apartment and pay your landlord’s mortgage, so consider the benefits of buying instead.
There’s no place like home. Though the financial benefits of home ownership are looked at most around mid-April, they are clear year-round. Home ownership, whether it is for a primary home, secondary home or investment, builds wealth over time. You will build equity each and every month you pay the mortgage, as a portion of that payment goes to what you owe on the home. Yes, we wish a larger portion went straight to the bottom line, but with each payment, you are whittling away at it. The months and years going by will shift the balance from your payments being interest-heavy to largely principal payments. Knocking down that principal balance is what builds the equity you have in your home faster. If you receive a commission or annual bonus, consider sending it straight over to the mortgage company. Paying an extra mortgage payment per year is a great way to put thousands of dollars back in your pocket and cut years off of your mortgage. That extra payment goes straight to the principal balance rather than the interest, so for example, on a $200,000 mortgage, an extra payment per year can save you over $30,000 and cut four years off the term of a 30-year mortgage! There isn’t much of an argument to send that extra payment to your landlord instead.
Other financial benefits to owning rather than renting your home include the tax deduction. As a homeowner, you are allowed to deduct the mortgage interest you’ve paid for the prior year. During those earlier years of a mortgage, that is a substantial deduction! And don’t fret if you’re saying that won’t help me if I buy this fall, as some closing costs may be deducted as well. This is a great time to talk to your accountant as advice and insight can shed some light on exactly what those deductions can add up to (and they aren’t as busy to reach this time of year). I could go on about the tax benefits but, again, I would recommend asking the experts about your specific situation and the benefits it may provide.
In the long-term, owning is less expensive than renting and we all need to live somewhere. So, instead of paying off your landlord’s mortgage, invest in yourself and your future. FBN
By Heather Brown
Heather Brown is a Realtor for Russ Lyon Sotheby’s International Realty. 219 N Humphreys St. Flagstaff, AZ. 86001. (928) 606-0652
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