Have you been considering moving this year? Did you decide to put your move on hold until the pandemic was more stable? Wondering if you should buy a home or continue renting? As moving season approaches, now is the time to do your research to prepare for buying or renting in 2021!
While 23 Legal cannot definitively say which form of living is the best for your family, we can help by sharing our pro’s and con’s of each living experience and how a real estate attorney can help you solidify your choice. After reading these key points, hopefully you’ll have a better understanding of whether you’re ready to buy your own property or continue to rent.
“There’s no easy answer to the question “Is it better to rent or buy?” It depends on so many factors: your age, your finances, your neighborhood, your future plans, the current real estate and mortgage market, just to name a few.” Money Under 30
The Case for Buying a Home: Positives and Negatives
For many Americans, homeownership is a life goal. Most people start by renting or leasing their way into homeownership. But not everyone has to follow this order, especially now as the price of homes and mortgage rates have been affected by COVID-19. Ever since the pandemic took off, mortgage rates are at an all time low, giving people the opportunity to purchase their dream homes faster! Before jumping into the real estate market for homes, there are many things to consider first.
“It’s fair to admit that as of today, U.S. homeowners may pay almost 33% less than renters if they take a 30-year mortgage, pay taxes and spend money on house maintenance. However, it’s important to note that it was 41% a year ago, so it means we’re 8% down, and looks like that number is still falling.” Rentberry
Positives Aspects of Home Buying…
This year is promising for extremely low interest rates on average home buys. Less than 3% in most states. These low rates give potential buyers a greater chance at loan approval and affordable mortgages they can safely maintain. Get the lowdown on mortgage rates in 2021 and find the right one for you!
Owning property is a solid investment that builds your credit over time! As you pay your monthly mortgage you are building your credit, you are building a positive credit history that you can (and will) benefit from in the future. When you pay bills on time and regularly, your credit scores go up. This allows you the opportunity to take on future loans with banks and credit unions. You’ll likely be building home equity with every mortgage payment. Get more information on home mortgages here.
Steady monthly fixed rate mortgage costs can help you to predict expenses in the long-term. When you know what your monthly expenses are, you can manage them more effectively. Establishing a set monthly payment plan for all your income gives homeowners the advantage of responsible financial planning. When people rent, they are at the mercy of a landlord possibly choosing to increase their monthly payments at the end of every lease resigning term.
You can control the setting within your property. By owning property, you have control over the land, amenities, and design. You can cut, paint, install, and build whatever you want, without needing to have the permission of a landlord. If you are the type of individual who enjoys decorating and painting without limitations, this is an ideal living environment for you. Unlike renting, when you own your own property you are your own landlord and make your own decisions when it comes to your interior design.
Enjoy new tax breaks every year! You may be able to take advantage of a mortgage interest tax deduction and other tax benefits. NerdWallet breaks down how tax reductions affect homeowners.
The standard deduction for the 2020 tax year is:
- $24,800 for married couples filing jointly, up $400 from the 2019 tax year.
- $12,400 for single filers and married individuals filing separately, up $200 from the prior year.
- $18,650 for heads of households, up $300.
Owning a home affords you more privacy. Renting forces tenants to share laundry rooms, hear their neighbors through the walls, and even share backyard spaces. If you have a noisy neighbor only separated by a single wall it can quickly become stressful. Outside of sharing wall space, you may also share where packages and mail is delivered. If you prefer having your own mailbox, laundry room and more control over noise levels, then homeownership is right for you.
Quick tip: If you find that you are having any difficulties with fellow tenants or living arrangements, attorney Ben Weaver can help you draft any legal documents to send to your landlord!
You’ll have the ability alter your property. When it comes to exterior property renovations, you’ll most likely need the aid of your real estate attorney to review zoning codes, construction permits, gas, water regulations, and even street layout. These are just some of the legal documentation Ben can help you with to achieve your home renovation dreams. Learn more about how your Ben can help you with home remodeling contracts and other common real estate situations.
You can live with furry friends (pets) without having to worry about landlord rules and added fees! Many landlords do not approve of animals living in their properties because of the potential for property damage, odors, or tenants with allergies. This won’t be a concern if you have your own place!
Home value may increase over time as the market and neighborhood improve. When schools in your area perform well, your property value increases. Additional police stations and fire stations can boost property value as well. There are other homeowner methods to increase property value and be able sell your home in the future. Learn more about improving your home for a successful sale!
Quick tip: When choosing the perfect home for raising children, finding the right neighborhood for them to develop is vital and will be an important factor in their upbringing. Whether this is your first home & you’re starting a new family, or you’re ready for a new chapter in a different neighborhood, attorney Ben Weaver is here to guide you in your search! Read Ben’s guide to choosing the right neighborhood.
Negatives to Owning a Home…
While there are an abundance of positives to being a homeowner, there are a few possible negatives to note. Before you rush out to purchase a home, read this first!
You break it you buy it. You are responsible for any and all home repairs. If something is broken or doesn’t work, it is your job as a homeowner to repair or replace. This can potentially lead to huge financial burdens. For example, if your furnace breaks down in the middle of winter, you would need to buy a new furnace to keep your family warm. On the low end, a furnace is $1500 dollars! Emergency expenses like this should be factored into your monthly finances to protect you from major debt or even foreclosure. Here is a Rent vs. Buy calculator to do the math on your current financial situation.
Stuck in one place for a while. If you’re the type of person who frequently likes a change of scenery, owning a home may not be right for you. When you purchase a property it is a long-term investment – especially if mortgages are involved, we’re talking several years. Even in the case of someone considering buying properties for home flipping, the average projected time span for such an undertaking is 18 months or more. Learn more about real estate investing here!
The Case for Renting: Positives and Negatives
Renting is a great opportunity for a variety of reasons. Renting is a great choice for smaller families or singles. It also gives the leaser a more hands-off approach. If you’re not into remodeling, shoveling or being responsible for property when it breaks, then this could be the right choice for you.
“As mortgage rates continue to fall, buying power is increasing in the U.S. Despite a lower number of homes for sale compared to previous years, many renters are turning to home-buying — leaving a big vacancy in the renter’s market.” The Simple Dollar
Positives for renting…
The renting market has plenty to offer. Due to the home buying market being so accessible, many people are rushing into buy property they may or may not be ready for. Yet, this leaves the renting market wide open. Apartments and condos that used to fill up quickly are now far more accessible than before! This is the perfect opportunity to choose an apartment that is in a prime location for your lifestyle. Unlike homeowners, renters have no maintenance costs or repair bills and they don’t have to pay property taxes.
Rental upfront costs are less compared to the cost of home buying. Even with record breaking low interest rates, purchasing a home requires large down payments and a good credit score. You may be in the early stages of your credit development and your score may not be high enough for lenders to entrust you with a large loan amount. Utility bills may be included in rent payment.
“Renting usually requires a security deposit equal to one month’s rent, whereas a homebuyer is required to have a sizable down payment—typically around 20% of the property’s value—when purchasing a home with a mortgage.” Investopedia
Rental amenities are always a plus! Inside of some complexes, landlords offer exciting amenities such as a door man, fitness rooms, pools, garbage services, and more. Many apartment complexes are offering more unique amenities to appeal to tenants tastes. With access to such useful amenities, you wouldn’t need a gym membership for example. Other amenities can include clubhouse spaces for renters to use for family parties.
Location, location, location! Have you always wanted the ability to travel and move around whenever you feel? Perhaps you are interested in the idea of being in the center of a large city. Exploring all of its trendy hot spots like theatres, stadiums, museums, and fun coffee shops. Chic apartments and condos that were once difficult to obtain are now hitting the renting market. With the huge spike in home buying, renters now have access to a larger network of beautiful rental properties in exciting locations! Did you know that real estate agents can help you find rental properties? Learn more about these helpful property finders and the benefits of working with an agent.
Enjoy a minimalist lifestyle. This is a major trend! People are ditching the excess lifestyle of martialistic focused living for owning less and having a smaller personal imprint on the world. This means less clothing, furniture, and even automobiles. If this lifestyle is more conducive for you, then choosing to rent might be ideal! Living in a smaller space with less to worry over is fitting for those with the “less is more mindset”.
“65% claim that they rent due to life circumstances and financial issues.” Rentberry
Great solution for starter families. If you recently got married or are moving in with a serious partner, finding a home is a large undertaking. Giving yourselves a jump off point like a condo or apartment is a smart move. Spend a few years organizing your finances until you are positive you can take on such a large step as homeownership. If at any point you are unsure of your lease with your landlord, bringing your lease to a real estate attorney like Ben Weaver for review is a great idea. Your family may start to grow, leaving you in the position to move into a larger space sooner than planned. Learn about setting up a living trust for your children!
Lower financial risk. It’s no secret that when a person takes on a mortgage, they bring some serious financial risk into their lives. Foreclosures can happen when the unpredictable happens: personal issues like divorce or death in the family, loss of jobs, health issues and as we al have recently discovered, pandemics. When you rent, there is more financial flexibility with falling behind on paying your rent than there is with a mortgage. Renting generally requires one months deposit and monthly installments in a yearly lease agreement with a landlord. Unlike a homeowners with a 20-30 year fixed mortgage loan connected to a bank. Let’s be clear, we aren’t saying that buying a home means you’ll go through a foreclosure if you fall on hard times. We are just explaining that it is very possible. If you aren’t ready for such heavy financial responsibilities, then renting is probably best for you.
Negatives to renting…
While there are many reasons why renting is ideal, there are also some cons to consider before choosing to rent. Renting isn’t ideal for long term financial investments. Renting can sometimes seem less complicated than homeownership but that may not be correct either. Before signing a lease, we recommend you look over our con’s list for renting. Then weigh if this is the best option for you.
When living in apartments, you’re sharing more than just walls with your neighbors. A major con about renting is the shared space. If you have neighbors who aren’t respectful of noise pollution and boundaries, you may struggle living next to them. As we touched on before, having neighbors in such small proximity can cause a wide range of problems and disputes.
Pests are unwelcomed and hard to get rid of! Between mice, roaches, and even bed bugs, when there is an infestation in an entire building it can be hard to contain. Even the maintenance for pest prevention involves strangers coming into your living space to lay traps and spray chemicals. If there is an outbreak in your building, then you’ll need to pay for temporary living in addition to rent.
Where is your money going? When you rent it, doesn’t affect your credit score as positively as owning property. Every month you are putting money into a property that doesn’t build value for you, it only builds value for your landlord. When their property taxes increase, your landlord can increase your rent. It’s also important to note that a landlord can choose not to renew your lease at the end of each year. That’s why it’s extremely important to have an attorney review your legal documents before you sign!
Women Belong shares: “There is also a significant and important argument to be made about building equity in a home. At a rent of $2,000 per month, you would spend a total of $120,000 over a 5-year period and $240,000 over a 10-year period. This is money being spent that does not build equity or accrue any value to the spender. On the contrary, spending money on a mortgage each month will go towards building equity and creating ownership and value in a piece of real property. As time goes on, a higher portion of each payment goes towards the payment of principal (also known as the build-up of equity).”
How 23 Legal can be of service for both first-time home buyers and renters…
There are a wide range of situations when having an attorney is a financial and legal life saver. Buying a home and renting properties are both major decisions. To prevent making mistakes that can affect your credit and finances for years to come, we highly suggest you reach out to an attorney with credible real estate law experience. Learn common situations that a real estate attorney can help guide you through.
Signing documents: This is a point where major real estate calamities can happen if someone signs legal documents they do not understand! Whenever legally binding documents require your signature, you should always have your attorney review them before signing! You may feel like this is a tedious step, but document consultations can even protect you from fraud, unfair contracts, and much more.
- Leasing agreements: When you find the perfect living space to rent, you will have to sign a 6-12 month lease. This legal binding document will contain a lot of information. This may feel overwhelming. Majority of leasing documents are written to protect the landlord from tenants. Reading through this paperwork is extremely important. If you do not understand any of the legal jargon, it’s imperative to contact your attorney.
- Closing on a home: This is also referred to as completion or settlement. It’s the final step in executing a real estate transaction. The closing date is set during the negotiation phase and usually takes place several weeks after the offer is formally accepted. On the closing date, the ownership of the property is transferred to the buyer.
Attorney Ben Weaver is here to guide you through the process of renting or buying a home in 2021!
Under “normal” circumstances, attempting buying a property without a real estate attorney can be difficult. Considering the current unprecedented conditions, this process can be especially daunting without a knowledgeable lawyer. Avoid making terrible and possibly irreversible mistakes by hiring an experienced real estate attorney to guide you through the legal process. Never attempt to make such important legal financial decisions on your own!
Haven’t worked with a real estate attorney before? No worries, browse our blogs to learn more:
- Common Real Estate Situations That Require An Attorney
- What Does a Real Estate Law Attorney Do?
- Q&A with Real Estate Attorney Ben Weaver
Home is where the heart is – and a restless heart can’t feel at home! Give yourself the experience of a balanced and peaceful new year by hiring an attorney that has your best interests in mind. Whether you decide to rent or buy a home, obtain legal protection with a trustworthy lawyer like Ben Weaver.
Please feel free to contact us for assistance or with any questions you have. Click here to read 5-star client reviews!
Would you like to learn more? Check out 2021’s real estate market predictions!
Why Choose 23 Legal
23 Legal offers Real Estate and Estate Planning legal services to individuals, families, community associations and small business owners throughout Chicagoland. We know how intimidating “the law” can be. In fact, when most people think of law offices, they think of stuffy leather chairs, huge wooden desks and pompous lawyers who charge outrageous fees. That’s not us! We believe in 1-to-1; the same lawyer should work with you all the way through. Whether you have an estate planning issue, family trust concern, or you have a legal problem in regard to a new home, business, real estate or remodel, you need a lawyer who cares. That’s where Ben comes in! We are great listeners; more than that, we are lawyers who believe that our clients always come first.