With the new tax law changes, fewer homeowners will itemize deductions because the standard deduction has been increased to $24,000 for a married couple and $12,000 for a single couple.


Sometimes real estate is an investment and sometimes it is simply where you live, so you need to analyze the costs and benefits of renting vs owning. With the continuous rise in rental rates, many buyers want fixed monthly expenses, security, and the creativity to make their home their own.


    If you purchase a home for $300,000 with a 10% down payment and get a loan for $270,000 with 5% interest, the monthly payment, for principle and interest, would be about $1,450. At the end of the first year the interest paid would be about $13,400. The property taxes would be about $4,000. With the total interest and tax expense at $17,400 a married couple would use the standard tax deduction, unless they have other tax-deductible items, and a single person could itemize the expenses.


  For $300,000 in Chisago City or Lindstrom, you can get a 4-bedroom, 3 bath home with about 3,000 square feet. If you were to rent instead, you could get a 2-bedroom, 1 bath apartment for about $1,400 per month. 


  The insurance and maintenance expense are higher if you own a home vs rent, but with the scenario above, you would have $52,000 in equity, without appreciation at the end of five years. If you rent at $1400 per month for five years would pay $84,000 in rent, and you would have nothing to show for it, unless you had another savings plan.


  If you know you are going to be moving in less than 5 years, your job is unstable, or your family situation could be changing, renting may be a better option. Owning a home has maintenance costs that need to be included in your budget and there are closing costs when you sell, so you want to work with an experienced real estate agent to avoid a bad investment.


To buy a home you need good credit, and a down payment of at least 3% of the purchase price, unless you have served in the military, then you can buy with zero down. 


 A professional real estate agent, a loan officer, or an accountant can analyze your situation to help you decide what works best for you. 

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.