RE/Max Integrity
4710 Village Plaza Loop,
Suite 200
Eugene, Oregon 97401
Bridget Armstrong
info@barmstrongrealestate.com
Direct (541) 984-5404
Office (541) 359-8973
Fax (541) 302-4899

Mortgage Information

Rent vs. Buy

Renting and owning a home both have there advantages. What might be an ideal situation for one person to own might be an ideal situation for someone to rent, it all varies from person to person and situation to situation. You get added benefits from either choice, it really just boils down to what you are comfortable doing and where you might be in the near future.

For instance, if you intend to relocate to another city soon or even to another state then the idea of renting would sound much more ideal. You don't have to worry about maintenance for a leaky roof, a dishwasher that may run past its life expectancy or in some cases even the lawn care. Some landlords take care of all of that for you within the lease agreement. Another Benefit is the flexibility; some landlords don't require a lease and allow you to rent from month to month thus allowing you to leave within a 30 day notice period, while others might require a 6 month or 1 year lease which still gives you a good portion of flexibility to leave after that time frame. Like I previously said, it all varies from situation to situation.

Other factors that might help you decide one way or another are if you are recently divorced and there might be financial uncertainty. If you are freshly out of school and joining the work force then the wiser idea might be to rent until you have a better financial security and are able to more comfortably afford a mortgage payment.

Owning a home has perks in itself other than the simple fact that it is your home or your family's home. You can see significant tax advantages within the interest that you pay. If you are renting for $900 a month then you are paying someone else's mortgage and they are getting that tax credit but if you are paying a $900 a month mortgage payment and, to keep things simple for the purpose of what we are trying to cover, $300 of that goes to interest paid on your loan every month. You are now paying a total of $3,600 a year in interest. You then can itemize those interest payments and deduct that from your taxable income. If your taxable income was $30,000 for the year it now became $26,400 for the year. That amount could add additional money back on your tax return.

True you do have to take care of the upkeep. There isn't anyone to turn to if the dishwasher breaks down or when the lawn needs to be mowed. But at the same time you're building equity in your home with each payment and you are building towards your net worth instead of your landlord's net worth. Plus after you've claimed residency in that home for 2 of the previous 5 years you then don't pay any tax on the amount you sell the home for. So if you bought the home for $150,000 (again, we'll use basic numbers for the purpose of what we are trying to cover) and after 2 years you owe $130,000 but 2 years later the market value is $170,000 and you indeed sell it for that amount, pay off your loan amount and then you get to keep that additional $40,000 without it being taxed.

So if and when it comes time to sell your home you can exclude a total of up to $500,000 (in capital gains) if married and filing a joint return or up to $250,000 if you are filing separately or unmarried.

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