A report released by the U.S. Census Bureau showed that the homeownership rate by the last quarter of 2019 was 65.1%.
With the steady growth of homeownership in recent years, it is clear that the American dream of homeownership is becoming tenable.
If you’ve been saving for a house, 2020 is a great year to make this life-changing investment. With the interest rates being significantly low, you will be glad you made the decision.
So, why is it a good time to buy a house in 2020? Keep reading to know some of the reasons you need to buy a house instead of renting.
Low Mortgages
With the reducing rates of mortgages, buying a home in 2020 is probably one of the best decisions you need to make this year. If your financial position allows it, make the decision as soon as possible. The rates might shoot up as the year progresses.
Currently, a 30-year fixed mortgage is attracting a rate of 3.29%.
Freddie Mac, who has been tracking the rate of mortgages since 1971, reported that the rate has never been this low for the last five decades. This unanticipated turn of events is attributable to the deepening spread of the coronavirus.
Most investors in the real estate industry are shifting to more fixed securities such as Treasuries.
The growing low mortgage rates are making home buying affordable for a significant number of Americans.
If the high rates have been a barrier to homeownership, you can make the first step this year.
Equity
When you’re paying rent, your landlord enjoys all the benefits. Conversely, owning a home through a mortgage means that your equity is growing.
Your home equity is the amount left after subtracting the home loan from the total house value.
Paying your mortgage each month increases your equity. In essence, paying for your dream home is a way of saving. The more your home value increases, the more equity it attracts.
In the future, you will use the equity to get more money. You can borrow a loan against home equity, which can come in handy, especially if you want to improve the home or make other investments.
With a home equity loan, you can pay credit card debt as the interest is considerably low.
If you’ve already identified a house that would make a beautiful home for your family, go for it. However, be aware of some of the hidden costs of buying a home.
The future financial gains, such as increased equity, shouldn’t make you buy a house blindly.
Tax Benefits
Renting doesn’t have any impacts on your taxation. Instead, the money you spend on rent counts as income, meaning that you have to report it. When you buy a house, you’ll benefit from several tax breaks.
Your property tax payments and mortgage interests are deductible from several state taxes and federal taxes.
Some loan discount points and closing costs are also tax-deductible.
These tax deductions can have a significant impact on your finances, especially the early years into the mortgage when you’re making bulk payments.
Typically, borrowers pay points to lenders as part of refinancing. Each of these points cost about 1% of the cost of your home. You get deductions when you pay money for these points.
If you decide to sell the house, the profit you make will have significant tax deductions. The first $250,000 you make as profit won’t be taxable if you have lived in the home for at least two years.
For a couple, the benefits double if the spouses have met the residency requirement.
Homeownership Is a Great Investment
Once you understand the economic impact of buying a home, the question ‘is it a good time to buy a house?' will have more precise answers.
Investing in a home is one of the wisest financial decisions you can make. While several economic dynamics can affect home prices, you’re likely to get substantial returns if you sell your home after many years.
When you use a rent vs. buy calculator, you’ll realize that renting an apartment doesn't provide you with economic benefits. In fact, you might end up incurring more in rent, as most property owners tend to raise the rent periodically.
While you’d want to buy a home that suits your family's needs, taking the step from an investor's perspective can have incredible future benefits.
The number of bedrooms and bathrooms in a home should have a futuristic perspective. The home features you prioritize should have considerable impact on your home value, even in years to come.
If you keep up to date with the housing market news, you’ll realize that the best time to buy a house is now. In the next few years, the value of your home will have grown exponentially. You’d be surprised at how much the decision to move from your rented apartment to a mortgaged house will impact your finances.
Savings
When deliberating whether to continue renting or own a home, an analysis for a price-to-rent ratio can help. The analysis involves dividing the price of the home by the annual rent of the unit.
If you get a ratio that’s less than 20%, owning a home would be a deal worth pursuing. Mortgage payments are cheaper than renting.
With renting, landlords can increase the rent at will.
Going the mortgage route will help you save, despite paying an overwhelming down payment. Besides, the payments that you make will help you avoid future housing costs.
Owning a home will force you to save. When you know that your mortgage fee is due every month, you can’t afford to spend recklessly on things you can forego.
If you ever decide to sell your home after paying off your mortgage, the returns will have you smiling all the way to the bank.
Recreate Your Dream Home
One of the benefits of buying a home as opposed to renting is the freedom to recreate a space you desire.
In your home, you can paint the rooms with hues that resonate with your preferences. You also have the freedom to change the carpeting, floors, and everything that would improve your home's appeal.
In a rented house, you can’t make some modifications, not unless you're willing to lose your security deposit. You have several limitations as a tenant. The property manager can even restrict pets in an apartment.
Once you buy a house that’s within your budget, you can make some of the structural changes gradually. After a few years, you will have your dream home. Depending on the modifications that you will make, the value will also scale upwards.
However, some things should be on your first-time homebuyer wish list as they are unchangeable. Never compromise on your preferred home size, neighborhood, and amenities. The value of the home will depend on some of these factors.
Build Your Credit History
Good credit history is a dream for most people. With future uncertainties, having a good credit history can save you when you need a loan.
Homeownership can improve your credit score extensively. A good credit range can save you about $41,000 in mortgage fees.
Being consistent in paying your mortgage each month improves your credit score. In the end, the high credit score will open opportunities for more beneficial loans.
Your credit score will suffer immediately if you get a new mortgage. You have to prove you can pay the loan by making monthly repayments as per the requirements.
Within a few months, it is possible to bring your credit score to the level it was before the mortgage with timely payments.
A mortgage is one of the responsible debts that will improve your chances of getting more of such loans in the future.
Home Ownership Gives You Security
In a rented apartment, your landlord can give you an eviction notice at any time. Despite the existence of laws protecting tenants, if a property owner decides to sell the property or rent it to another person, there’s nothing much you can do.
With homeownership, there is an aspect of security. You won’t have to worry if a landlord starts making different plans with the house you have rented.
Homeownership will give you a sense of stability, and you will be more confident to make long-term plans such as putting up a business.
Is It A Good Time To Buy A House? Of Course It Is!
Homeownership is a crucial financial decision that can change your economic status. Yet, many people are often in a dilemma to make this move, as renting can keep one in a comfort zone. However, when you make a conscious calculation of the rent you pay each year, you’ll realize that buying a house is a wise move.
Is it a good time to buy a house in 2020? Well, this year is probably one of the only years where the mortgage rates will be this low. Take advantage of the economic status in the country and get your dream home.
Are you looking to buy or sell a home? Contact us today for all your home and real estate needs.