Blog

11 Reasons to Not Rent a Home

11 Reasons to Not Rent a Home

I recently read a great article by Forbes contributor Kelly Phillips Erb on the 11 reasons why one may not want to own a home.

(11 Reasons Why I Never Want to Own a House Again)

You would think that as a CEO of a mortgage brokerage, I’d recommend that everyone buy a home. As a matter of fact, I don’t.

When people tell me they want to buy a home because they think it’s a good financial move, I recommend that they reconsider why they want to buy a home. You see, you should buy a home because that’s where you want be – for whatever reason: you’re close to your family, you want your children to grow up there, it’s 10 minutes from your job, you have access to public transportation, you love the community, etc. etc.

Buying a home is not always a smart financial move – for many of the reasons Erb points out. When you buy a home, you’re buying a physical asset – an asset that can take years to appreciate in value or, as many of us have discovered, depreciate in value through no fault of your own.

But, as in any discussion, a list can easily be made for the 11 reasons why someone would not want to ever rent again either . . . for instance:

1. Your landlord could be a complete jerk and make your life miserable.

He or she can stipulate that you not make any changes to your home or apartment or that you not have pets (even a hamster or fish!). If you live in the same building as your landlord, he or she knows your (intimate) business.

2. You can get kicked out at any time.

A landlord can sell the property and or tell you that you have to move because his daughter and her husband need a place to live. Or, if you become pregnant, you violate the “no children” lease clause the minute your baby is born.

3. There’s always the thought that you’re making someone else “rich” by paying rent.

The building appreciates in value – but you don’t benefit financially from this appreciation.

4. You have to deal with the stigma that something is wrong with you because you “rent” –

Even if you travel a great deal or you’re an empty nester or you simply can’t afford right now to buy (and that is ok!), or you don’t want to deal with maintenance, or [add your own personal yet valid reason]. Let’s face it, when you don’t own a home, people think something is wrong with you, which is how the whole, “buying a home makes financial sense” meme got started. It’s also why too many people buy homes they can’t afford.

5. It is more difficult to “rent” that lovely close-knit neighborhood.

When you rent, you’re subject to the market and available inventory. And, if you do luck out and find a great house, your landlord could sell it or tell you it’s time to move . . . just as your kids have become settled into their schools.

6. You may spend money to improve someone else’s property.

Some landlords are perfectly fine with you making minor upgrades to their property – as long as you pay for them. This scenario leads to a damned if you do, damned if you don’t outcome: if you don’t make the upgrades (and your landlord refuses to), you’re stuck living in an ugly home. Damn.

7. You don’t get the mortgage interest deduction.

A few states, such as California, give you a renters credit, but otherwise, you get nada. In the early years of a mortgage, that interest deduction is considerable.

8. Your rent can go up.

If you lease your apartment or home, you’re rent is stable for the year – but when you renew your lease, your landlord can raise your rent – to whatever she thinks she can get for your apartment. Don’t like it? Move or suck it up.

9. A rental is not an asset from which you can borrow.

Now, I’m not advocating you use your home as an ATM, but you can borrow from it in case of an emergency (if you have equity built up). When you rent, don’t have an asset from which to borrow, and thus can’t take advantage of home equity loans or cash out refis. You also have no collateral to help you obtain other loans.

10. You don’t have a home you can leave to your heirs.

You don’t need to be John D. Rockefeller to leave behind an “estate.” If you have young children and/or a spouse, one thing you can do is set up a trust and put your house in it. Think of trust as a suitcase: should something happen to you, the suitcase (and everything in it) is passed to your heirs intact without having to go through probate – which means, your children and spouse can continue to live in the house. You can’t do this when you rent.

11. Your quality of life is different.

Now, you can have a wonderful quality of life when you rent – but it does depend on why you’re renting and where you live. But, if you’ve dreamed of owning a cozy home on that wonderful tree-lined street, having parties in your backyard as you grill burgers, and walking your children to the local elementary school, then your quality of life is not what it could be if you rent.

Renting vs. owning — Do what’s right for you

Renting is good – especially if you don’t want to be tied down and you want freedom – or your empty nester and you simply want a smaller space without having to deal with the maintenance a house entails.

But, when you’re making the decision between renting and owning, take the “it’s a smart financial decision” off the list and instead consider all the other reasons listed in this article and the one by Erb. You’ll find that whatever you choose, you’re doing so for the right reasons.

Need help with deciding if owning a home is right for your situation? Call one of our financial advisers. We do more than simply quote mortgage rates – we’re here to help make the right decision for you.

Rent vs. Own: Which is the Winner Now?

Rent vs. Own: Which is the Winner Now?

In 2011, we wrote a blog post weighing the pros and cons of renting versus owning a home. In our assessment, we considered variables such as the economy and job stability, interest rates, home values, the rental market and the mortgage interest rate deduction. At that time, there was no clear winner between renting and owning. Now that two years have passed, have any of these variables changed? Is there a clear winner between renting and buying today?

Some variables have changed since our 2011 analysis. The U.S. economy and job market has recovered considerably, although slowly, which is good news if you’re considering buying a home. If you’re going to take on the responsibility of home ownership, you need to be able to cover expenses like real estate tax and maintenance in the long term, so the state of the economy and your job stability is important.

Housing market: Prices continue to rise

House values have also changed over the past two years. In 2011, home values were extremely low. Foreclosures and short sales meant previously unaffordable homes were selling at much reduced prices. Today, home prices are rising and fewer deals are available. U.S home prices jumped almost 11% in March 2013 as compared to March 2012 according to a Financial Post article. This may put some homes out of reach of potential buyers. It may also encourage potential buyers to get into the market before (and if!) housing prices climb higher.

At the same time, the rental market is also changing. Private equity investors, such as Blackstone Group LP and Colony Capital LLC, have been buying up low-priced homes and putting them on the rental market. In some areas, more rental homes are available than before, and increased availability may help keep rents low – a benefit if you’re considering renting.

Interest rates still very low

But not everything has changed since 2011. Interest rates remain low, and (as before) analysts continue to speculate on how long they’ll stay that way. If you’re considering buying a house, it makes sense to get in while rates are low.

As in 2011, the mortgage interest deduction also remains in place – for now. Discussions about eliminating the deduction continue. House Ways and Means Committee Chairman Dave Camp has been looking for ways to eliminate tax loopholes and, apparently, the mortgage interest deduction is under consideration. At the same time, several powerful groups are in favor of keeping the deduction, such as the real estate lobby. It’s anyone’s guess as to the final outcome.

My personal advice

Too many people buy a home based on the thinking that it’s a “smart investment.” A home is a tangible asset that requires time, money, and care; often times, your “investment” can feel like a big hole in the ground where you’re pouring money. If you’re looking for return on investment, my advice is to invest your money in stocks and bonds instead.

If you want to buy a home, buy it because living there will make you and your family happy for a long time. When you have this mentality – versus a “cash register” one – the market ups and downs won’t bother you. You’ll view your house as your home – one that sustains you and your family.

When you approach the home buying decision process this way, the decision to rent also becomes easier. In the U.S., we have an unspoken stigma about renting. If you rent – and you may have very good reasons for doing so – it’s assumed you can’t afford to buy a home. Due to this societal pressure, many people are driven into making a huge financial purchase for the simple reason they don’t want to tell people they rent. If they purchase a home they really can’t afford, they fall into financial trouble.

If you rent, and you want to keep renting because of the benefits it offers you, ignore this pressure. As I’ve indicated in this article, renting or owning a home both have their pros and cons. Whether you should rent or own comes down to your personal situation and what’s best for you.

If you’re considering a home purchase, however, and need a loan, consider Meridian Home Mortgage. We’re here to help you.

Is Meridian Home Mortgage Legit?

Is Meridian Home Mortgage Legit?

One of the difficulties in serving such a large geographic swath of the United States is that it takes time to build what marketers like to call “brand recognition.” Even worse, people sometimes confuse us with other mortgage companies with similar names.

So for those of you not familiar with Meridian Home Mortgage, here are just a few ways in which we’re “legit” and different from our competitors:

We’re a mortgage broker, not a mortgage lender.

Mortgage lenders work on behalf of their lending institutions. Mortgage brokers work for you, the homebuyer, and act as a conduit between you and the lenders. This means we work on your behalf to find you the best rates and loan conditions. In addition, because we’re licensed to operate in multiple states, we can find you the best rate not just in your state, but in 14 states.

As mortgage brokers, we must be licensed in each state in which we do business – and we’re personally liable for fraud – punishable by prison – for the life of each loan! Bank loan officers, in contrast, may work under the license of their bank – and thus do not have to be licensed themselves.

Mortgage brokers also an advantage over mortgage lenders because of certain consumer laws. These laws subject mortgage brokers to fee thresholds. If our borrower fees exceed a certain percentage of the loan, then we have to meet additional regulatory requirements. Therefore, mortgage brokers are incented to keep borrower fees below this threshold. Banks and bank lenders are not subject to these same “high cost mortgage” laws, so they don’t have the same incentive to keep their fees low.

We’re licensed in 33 states.

From our head office in Westminster, MD, we’re licensed to operate in 33 states, including California, Alabama, Florida, Kentucky, Maryland, Massachusetts, New York, Oregon and Washington, to name a few.

We have an A+ rating from the Better Business Bureau.

A rating from the BBB is something you cannot buy. To attain it, you must consistently deliver excellent customer service.

When compiling its ratings, the BBB monitors accredited businesses for adherence to its standards. Complaints or failure to file information can result in a loss of accreditation.

We’ve been in business since 2001.

For the past 15 years, we’ve helped thousands of families purchase homes, pay off debt and reduce their monthly payments. And while we’ve grown and expanded, we still treat every customer as a neighbor – because after all, our office is located in Westminster, Maryland! (If you’re ever in town, stop by and see us.)

To learn more about Meridian Home Mortgage and to find out how we can help you with the purchase or refinancing of your home, please give us a shout. We’re here to help you.

Offset Your Underwater Mortgage – Rent Out Your House

Offset Your Underwater Mortgage – Rent Out Your House

While you’re waiting for HARP 3.0 to make its way through Congress, how do ease the financial pain of owing more on your home than it’s worth? One option is to rent out an available spare room, your basement or attic, an in-law suite – or your entire house!

Thanks to the Internet – and lots of savvy entrepreneurs – you can now list your room or home (or even your tree house, igloo or tropical island) on sites such as AirBNB.com and GameDay Housing.com.

Used by travelers, students, visiting faculty, sports fans, convention attendees – and people who simply don’t want to stay in a hotel – these sites let you easily market the space you have for rent – while taking care of all the backend issues for you, such as collecting money and screening people.

Make your empty space work for you

By renting out your available space, you help defray homeownership costs. And, depending on where you live and the space you have available, you can potentially collect more money in rent in just a few short months than you actually pay in mortgage all year.

Let’s say you live in an area that’s in a summer or winter vacation destination. You could rent a room or your entire home for the “season” (summer or winter) by the day, week or month. Vacation rentals during summer “high season” on Cape Cod, for example, can run anywhere from $800 to $4,000 per week.

(Of course, if you rent out your home for a season, you’ll have to find somewhere to go – i.e. in-laws, friends, etc.).

You don’t have to live in a tourist destination to gain the benefits of renting out space in your home. If you live in a college town, for example, you could rent to visiting faculty or students. If you live in a city that has a convention center, you can rent your spare room to exhibition or convention attendees – especially since local hotels often sell out in advance.

Is renting out your home for you?

When deciding whether to rent out unused space in your home – be it the basement or a spare room – you’ll want to consider the following:

Your family’s need for privacy – Do you want renters to become part of your family or no? You may want to draft “house rules” that explain to which parts of the house people have access and when.

Security – When determining which site to list your available space, do carefully consider how you’ll screen people. Some of the listing sites, such as AirBNB, have built-in security. Renters and rentees must verify their ID and sign in using a social network such as Facebook. AirBNB also insures each rental – no matter the size – for one million dollars.

Amenities – Does your space come with its own bathroom? Does it have a separate entrance? Will people have access to your kitchen? Do you have wifi? These amenities can help increase your rental rate – and make your space more attractive to renters.

Check applicable laws and regulations

Before renting out any part of your house, check with your town or city hall and state for any landlord-tenant laws or zoning ordinances. You’ll also want to call your insurance agent regarding your homeowner’s policy. And, don’t forget to call your accountant. If you meet certain conditions, the rental income you generate could be tax-free.

Rental listing sites

You can find dozens of places where you can list your unused space for rent – everything from Craigslist.com to Roommate.com. We’ve listed three of our favorites as they offer you a wealth of services – and they place a high emphasis on security:

AirB2B – Started by three guys with airbeds in 2008, AirB2B now boosts over 300,000 listings worldwide in over 33,000 cities. The site lets you upload photos of your space and includes a calendar where renters can see which days your rental is available. (And, if your bucket list includes a stay in a lighthouse, this is the place to book that wish.)

Gameday Housing – Owned and managed by real estate professionals who oversee the entire process for you, Gameday Housing allows you to list your home for rent to people attending sports events. According to the site, people who do this can earn $15,000 annually.

Homeaway.com – If you have a vacation home or second home, you can rent it out via this site. Homeaway offers five subscription levels that include advertising and listing options.