Should You Buy or Rent?

There are many advantages to buying a home instead of renting. In many cases, the amount of money a person spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit available to homeowners, the savings can be significant. There are pitfalls too.

Pros of Renting

  • Lower cost upfront – As a renter, you will be required to pay first and last month’s rent and perhaps a security deposit for a pet. If you buy, you will be required to pay a hefty down payment, plus costs for the home inspection, closing costs and other potential items such as a survey and sewer scope. It’s a difference of a few thousand dollars if you rent compared with tens or even hundreds of thousands of dollars if you buy. Freedom and flexibility – If you are new to the area, you can rent and use this time to check out neighborhoods to see where you might possibly want to buy. By renting you can test an area without committing to it.
  • Invest money elsewhere – You can take money that would normally be spent on a down payment and house costs and invest in the stock market or other investment opportunities that could get a better return on value, depending on location.
  • Uncertainty in your career – If you think you might need to move in the near future, or are mulling job changes where you could be relocated elsewhere in the country, renting affords the freedom to come and go as needed.
  • Uncertainty in income – If you expect a pay hike or pay cut in the near future, that can change your borrowing ability as well as impact your ability to pay a mortgage.
  • Time to establish credit – Got bad credit? By creating a history of on-time rental payments, it can help you build good credit that you would need to qualify for a mortgage.
  • No maintenance – When the pipe leaks under the sink, you don’t head to your nearest hardware store, you head for the telephone and call the landlor
  • Incidental expenses – Occasionally, the landlord might pick up costs for utilities such as water, sewer, garbage, and in some cases heat and hot water as well.

Pros of Buying

  • Build equity – When you pay rent, you don’t own anything. When you pay a mortgage, you increase your degree of ownership in your home with every payment. Also, you can borrow against your ownership (or equity) in the home to pay for major purchases and you can refinance your home at favorable rates to help fund major purchases.
  • Tax Deductions  – This one is the biggie! Nobody likes paying interest on a loan, but it becomes more bearable when you realize that on a home loan, that money is tax  deductible. The federal government allows you to claim the interest paid on your home loan during each calendar year as a write-off on your taxes. These tax deductions aren’t available for people who rent. Not only that, but if you meet certain requirements the IRS won’t apply a “capital gains” tax on your profits from the sale of your home.
  • Have creative control – You like dozens of pictures on the wall? Well, hammer away they are your walls now. Like the color mango? Go ahead and paint. Wish you had another room? Go ahead an
  • Maintenance choices – If you own a home, you can decide how to approach maintenance, either doing it yourself or picking your own contractor. If you live in a rental, you are at the mercy of the landlord when repairs are made and how.
  • Pride of ownership – It might not make sense for everyone, but having a home you own is still the ultimate American Dream.

Decisions, Decisions…

Whether you decide to take the step of home ownership is a personal choice with its own ups and downs. Hopefully we’ve helped dust off the magic ball a bit; what you see in your future is up to you!

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