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Both buying and renting have their advantages. The better choice for you depends on your circumstances.

Here are some of things to keep in mind when you weigh the benefits of renting against the benefits of buying.

RENTING

Renters are responsible only for paying the monthly payment as stipulated by the contract, paying for utilities (power, gas and electricity) and for limited kinds of maintenance to the property. Renting a home allows the tenant flexibility to move or upgrade at almost any time, depending upon the lease. Renting can also allow a tenant to build up savings, as investment into the property is minimal. These factors are a plus for tenants whose lifestyles do not allow them to purchase a home or whose incomes do not allow them to afford a mortgage loan.

Although renting requires less responsibility and provides flexibility, it has its disadvantages too. Renters do not earn equity in the home and are not able to reap the tax incentives or equity earned on the home. Also, annual rent increases can outpace the economy.

The added responsibilities as a new homeowner:

  • Commitment to making a monthly payment in full and on time, today and into the future.
  • Extra expenses, including property taxes, homeowners insurance, homeowner’s association dues, tax assessments, and, if you put down less than 20%, private mortgage insurance.
  • Unpredictable maintenance, including small expenses, like a clogged drain, to big expenses, like replacing a roof.

OWNING

Home ownership provides several benefits, including a sense of stability and security. As a tax benefit, owners are able to write off mortgage interest and taxes paid on the home on their income taxes. Owners earn equity in their home and can create retirement security.

As with renting, owning a home has certain downsides. Owning a home requires a significant investment, including securing the mortgage loan (with the down payment, home inspection and any other associated fees), paying property taxes, maintaining the property and making home repairs. These costs add up and can be financially challenging for many owners. Another disadvantage is the lack of flexibility to move. If an owner wants to relocate, doing so will require that he sell the property. This can be quite a daunting task if the market is not favorable.

 First time buyer benefits include opportunities to:

  • Gain home equity by paying principle. The principal portion of every mortgage payment you make has the potential to grow your asset.
  • Take advantage of tax benefits as mortgage industry and real estate taxes are usually tax deductible. (Consult a tax advisor regarding the deductibility of mortgage interest.)
  • Build your credit by making on-time mortgage payments can help you create and keep up a strong credit history.

There’s never been a better time to buy a home.

Just look at some of the leading reasons to own your own residence, instead of renting.

Great deals available

Homes are affordable and the selection favors the buyer (that’s you!). Plus, prices are 30% lower than their peak a few years ago.

Mortgages are cheap

you can get a 30 year loan for around 4% and what’s not to like about that.  As recently as two years ago the rates were about 6.3% and that was considered a good deal.

Affordable loans

LoanLynx is facilitating home purchase loans for around 4% – far less than the 6% or higher of a few years ago.

Available tax deductions

You can deduct the mortgage interest you pay on you home loan each year.  Plus, when you sell your home, you get a tax break on any capital gain you realize.

It’s all yours

Simply put, not only is owning better than renting from a financial standpoint – your home is yours to enjoy for ears to come.

You choose where you live

Unlike renting, where you may have to take what you can get, home ownership allows you to choose your neighborhood.

Inflation fighter

Chances are over a long period of time, your home will increase in value and provide you with equity for the future.

Risk capital

If your home increases in value, you have more equity in your overall portfolio.

It’s like savings

Every month, a portion of your payment goes to principal, increasing your equity stake over time.

Final Decision

There are many factors to weigh when considering renting vs. owning a home. Each choice provides great benefits, but deciding which is better requires borrowers to conduct research, examine their financial situation, review potential lifestyles changes (family additions, job changes, and so on) and long-term goals that could impact living arrangements.

If choosing to purchase, the purchaser should review all costs associated with the initial investment and have savings or a savings plan in place to help cover unexpected costs. If choosing to rent, the renter should make monthly investments in a savings plan. Investing money for the future can make a transition from renter to homeowner smoother.

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