Should I buy or rent - Should I buy a home or continue to rent is a common question asked by many people considering homeownership. Homeownership can be a very rewarding and beneficial achievement, but there are also responsibilities that go along with homeownership. Renting a home or an apartment is basically similar to "throwing money out the window". While there is less responsibility with renting you are also not investing into your future. With homeownership you are able to make your monthly housing payments while building equity into your home.If you want to purchase a home, but do not have to worry about some of the normal upkeep issues you may want to consider purchasing a townhome. Your monthly association dues typically cover things such as lawn maintence, snow shoveling and plowing, roof and siding upkeep, etc. For many people a townhouse is a nice way to gain the benefits of home ownership, while taking out some of the upkeep responsibilities associated with a typical home.
When comparing renting to buying, many people look at the rent they would be paying now vs. the house payment they would be making now. There are 3 other financial factors to be considered-
- Most home owners benefit from a mortgage interest deduction on their taxes. This amount varies based on income levels, other deductions, and monthly interest amount, but a moderate income home buyer with a $1300 a month payment could typically save a couple hundred dollars a month in taxes.
- With a fixed rate mortgage your monthly principal and interest payment won't go up for 30 years. If you continue to rent however, expect your rent to rise 3-4% per year. So, if you were paying $1000 a month in rent compared to $1000 a month house payment, in 10 years your house payment would be $1000 or your rent payment would be $1410 after a 3.5% increase per year.
- Well maintained homes will generally increase in value over time. A $150,000 home over 10 years could increase in value to $222,036 (a $72,000 increase) by appreciating only 4% a year. Compare that to renting, where if you move out after that 10 years and have done a really good job of cleaning, you will get most of your security deposit back.
There are signinficant tax advantages gained when buying a home -vs- renting.For a full understanding of how owning a home can benefit your tax situation, consult your CPA or accountant.
If you prefer to not have to worry about fixing anything, then renting is probably the best option for you. If you rent most management companies take care of any problems that might arise while you live in your apartment. If you are the homeowner, then it is your responsibility to make any necessary repairs throughout your home.
When deciding if renting or buying is your best option you should analyse your current lifestyle and the trends in the market in which you live in. What is good for some people is not always the best for you if you are not committed to all the responsibility of home ownership. Owning a home is making an investment into your future and should not be taken lightly. Home ownership is a step which can benefit you greatly, or if you do not take the home ownership seriously it can ruin you for a long time.
Buy vs Rent - One of the main benfits of buying a home vs. renting a home (or apartment) is that your mortgage interest that you pay each year is tax deductible. This can help at tax time to get more money back from the IRS. Another advantage of buying vs. renting is that with buying a home you are actually investing your money into a fairly safe investment. Unlike renting, when you are basically just throwing your money out the window.
Ask your mortgage professional to provide you a detailed analysis of the benefits of buying vs renting. You will see many benefits of buying.
Another benefit in buying a home insted of renting is that you will be building equity. Your equity can later be turned into cash.
Owning your home vs. buying represents much more in terms of freedom and security. Very few renters actually realize that on a month to month rental the landlord can ask them to leave with only 30 days notice. This can usually be done without cause, meaning that they normally would not need a reason to do this. In many cases, rental properties have restrictions on how many persons may live in the property, pets, number of automobiles allowed, and many other things that can affect the way the renter lives.
There are many rent vs buy calculators available online that will help deomonstrate the advantages of homeownership compared to your current renting situation. These calculators provide all different kinds of information such as tax savings, equity gained, and a breakdown of differences between the payments.
Another advantage to buying a home is that you are locking into a payment. As in most cases rent will increase yearly while your mortgage payment may stay the same up to 30 or 40 years.
Keep in mind that owning a home has many responsibilities too that renting does not. A homeowner needs to upkeep the home. If the furnace goes or the hot water heater quits a homeowner needs to take care of these items. As a homeowner you must make sure that your property taxes and homeowners insurance get paid. Also, as a homeowner you must upkeep the exterior of the home, the yard, landscaping etc... While these responsiblities do exist for a homeowner the benefits of owning your own home still outweigh and are much more rewarding than the benefits of renting. Your home should always appreciate in value and you are going to basically make money simply for living there and making your monthly housing payment.
For many people, psychological and emotional factors drive their decision to stop renting and buy a home. These factors include pride of ownership, a feeling of establishing roots, a desire for a place to raise a family, desire for privacy, and freedom - freedom to paint your walls any way you want, freedom to barbeque on your own back porch, freedom to play with your dogs in your own back yard.
