I just had a client who really wanted to buy and as we sat and discussed her goals and where she wants to be in five years and ten years we came to the conclusion that renting made a lot more sense for her. I want to help my clients find and create a home they love whether it is renting or buying. If you are struggling to figure out what is best for you please reach out and I can help you analyze the pros and cons.
RENT IS CRAZY IN CHICAGO
It is hard to find a situation where renting is cheaper than buying in Chicago right now. A new report puts the average 2 bed rent in Chicago at $2254. Unless you love commune living and would like a ton of roommates. Well, its not that bad, but in all honesty in most situations it makes more sense to buy then rent right now.
I just bought a new place that would rent for $2700+ yet my mortgage, taxes, HOA dues and insurance add up to $2200. I am getting a lot more for my money by buying and if I decide to move somewhere else in the future it is a great investment property. My cash on cash return the first year would be 17%. Not a bad investment.
RENT VS. BUY CALCULATOR
The best tool I have found to analyze whether it makes sense financially is this New York Times calculator.
If you are curious what you could buy with what you are paying in rent contact me and I will send you some ideas so you can get a picture on if it would make sense for your situation.
YOU DON'T NEED A LOT OF MONEY FOR A DOWNPAYMENT
You can get an FHA loan for 3.5% down and Guaranteed Rate offers a 1% down program that is pretty amazing. I know crazy. Read more about it here.
Also check out this list of my favorite lenders and see the different programs they offer. Associated Bank is offering a 4% grant right now for certain census tracks and/or income levels. This can help cover your closing costs or go towards your downpayment.
You can deduct your interest, mortgage insurance premiums and your real estate taxes. There are also more deductions to be made if you have a home office.
For example, if you paid $4000 in interest, $5000 in real estate taxes and $600 in mortgage insurance. This is $9600 in deductions you have. If your tax bracket is 25%, then that is a $2,400 credit against your tax liability for the year. You owe $2400 less in taxes than you would have if you were renting!
There is also a program called TaxSmart which gives you an income tax credit for 25% of the interest paid on your mortgage. There are income limits to this program and it has to be your primary residence. So in the above example if you were enrolled in this program you would also have another $1000 credit to your tax liability. Both my favorite lenders Barry Schwartz of Perl Mortgage and Kyle Perks of Guaranteed Rate can speak to you more about this program.
PROTECTION AGAINST RISING RENTS
Rents have increased dramatically in Chicago this past decade. Are you picturing yourself staying in Chicago a long time? If you buy you wont have to worry about being priced out of the neighborhood you have come to love.
This is great if you are not good at saving money. Buying is a way to force yourself to save. As you pay off the balance of your mortgage you are building equity in your home. Plus if you buy right in a growing area your home will continue to appreciate giving you even more equity.