Don’t Borrow the Home, Buy It!

Here at KB Home, we simply cannot put a price on the freedom that comes with owning your very own home. When contemplating whether to rent or buy your home, you need to carefully consider your future plans.

In an analysis of buying a home versus renting one, The New York Times makes one point clear: “The choice between buying a home and renting one is among the biggest financial decisions that many adults make.”

When you own your home, you invest in a security that pays the dividend of freedom.  In an expert analysis of the issue, MIT economist Erik Brynjolfsson puts it this way, “…owning a house gives you ‘residual rights of control’ to do what you want with it and that kind of ownership creates psychic rewards…” He’s talking about the peace of mind that you and your family get from the freedom to personalize your home as you see fit

Hear what one KB Home owner says about the freedom of security

In addition to the “psychic rewards” of home ownership, there are many financial benefits.  Why pay rent to someone else, when you can pay it to yourself?  “A house generates enormous rental value each month—like a dividend.  If you rent it to yourself, you take money out of one pocket and pay it to the other one, and the IRS doesn’t tax that.” Over the long term, the money you save can really add up.

Buying a home is also a way of investing in an asset with the potential to appreciate, or gain value over time. While home appreciation varies widely by location, experts at the Demand Institute project that homes will continue to appreciate by “an average of 2.1% between 2015 and 2018…”

Currently low interest rates are making the long-term investment in a home more accessible to new buyers.  Experts believe, however, that these rates will likely increase, closing the market to many future would-be buyers.  “You are likely to get the best rate you will possibly see, perhaps in your lifetime through the majority of [2016],” says chief economist for Realtor.com Jonathan Smoke.  Seemingly small increases in interest rates can have a huge impact on how much money you can afford to borrow and the price of the home you can afford to buy. Imagine you are looking to buy a home and would like to borrow $400,000 at 4% interest on a 30-year fixed mortgage. If you wait and interest rates raise just 1%, your monthly payment will be $237.63 more and you will pay $85,546.80 more over the life of your loan.

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You can use this simple mortgage calculator to help you determine how much you can afford to spend on a home. Just enter in the current interest rate on a 30-year fixed loan (around 4%) and change the amount you would like to borrow until you find a monthly mortgage payment that you can afford. There are additional expenses related to homeownership, such as property taxes, property insurance, homeowner association fees and maintenance, which could impact affordability so it is important to factor in all of the applicable costs as you define your home’s price range.

Another perk to buying is predictability. You can rest assured knowing you are paying a fixed rate. In fact, fixed-rate mortgage payments don’t rise over the years so your housing costs may decline the longer you own the home. Needless to say, this is not the case for renters. Rent may increase whenever you sign a new lease, you could pay more for having a pet, and utility cost can vary by landlord and region.

The potential “psychic” and financial benefits associated with homeownership can make it a rewarding experience for you and your family. The historically low interest rates available today make it a particularly good time to consider owning your home instead of renting it.

Aside from the financial aspect, another benefit of buying a home is the freedom to customize it. You can make all the changes you want without having to ask for permission from a landlord. This can be as small as saving tick marks on the doorframe from the years your kids were growing the most. Owning allows you to make big changes like changing the floors or redoing a bathroom. You can create the home you want.

Stability is another factor to consider. Staying in one community for an extended period of time gives you the opportunity to have great long lasting friendships. Building relationships within a community gives you a sense safety in your neighborhood. Continuity is a plus for the children!

Read about all the KB communities – their locations and what they have to offer in our communities & floor plans tab here!

Are you ready to buy? Our sales team can help you find the KB Home of your dreams! Contact us by phone 888-KB-HOMES™ or Online.

If you are not convinced, check out one of our earlier blogs: 2016 – THE Year to Buy a New Home? Read why others think the time to buy is now!