Why You Shouldn't StrikeBuying From Your Plans
By Colleen Barry, CEO of Gibson Sotheby's International Realty
There are a lot of people paying a 100% interest rate on their residence. That is a sad state of affairs, since they are building no equity.
You might be asking, "What program would have someone pay a 100% interest rate for their home?"
Don't get me wrong. Renting is a great option for many people:
- Those who are at the start of their careers
- Those who want to get familiar with a new area before making a purchase
- Those who wish to take advantage of a strong seller's market
- People who are unable to come up with the downpayment to buy a home (There are programs available in Massachusetts to help first-time home buyers with down payments)
- People who require flexibility in where they live
However, renting for the long term is not a great solution for most people. The reason this is particularly relevant now is because of all the discussion over the mortgage interest rates. Some renters are staying put instead of looking for a home to purchase because of rate volatility, and my fear is that they are missing out on an opportunity to build wealth!
Some of the benefits to owning a home are:
- Building equity with monthly mortgage payments
- Predictable monthly payments (with a fixed rate mortgage)
- Tax deductions
- Ability to alter the space to your liking
- Ability to tap the equity for future needs — educational expenses, vacation home, emergency expenses
Are the rates too high?
My first mortgage in 1999 was in the 6-7% range (At the time I had a student loan that was over 9%). I purchased a small condo in an emerging neighborhood in Boston. When the rates began to drop, I got a call from our mortgage agent who suggested I refinance. I was able to pay off my student loan with some of the equity I had built.
Owning a home became a financial instrument to improve my life.
Making the decision to buy a home or rent a home is one that each person needs to make for themselves. It helps to confer with trusted advisors. I had a financial planner and a CPA who helped me with my decision.