A Comparison of
Renting Versus Owning
Buying a home rather than renting has been a decision many homebuyers and
would-be homebuyers have weighed. With no shortage of advice from well-intended
friends and family, the decision can be quite difficult for potential
The easiest way to determine if you should buy or rent is to look at the pros
and cons of each course of action. Once you have reviewed the benefits and
drawbacks of both renting and buying, you'll be able to determine which
makes more sense for you.
The home buying versus renting debate usually centers on the following topics:
* Financial considerations (costs)
* Ability to easily move
* Tax benefits
* Overall quality of life
For most homebuyers, financial considerations are the most important factor
in making the decision. Though some financial experts are amazed that this is
even an issue, many understand that the confusion over finances is primarily due
to a lack of accurate information.
Most potential homebuyers are shocked to learn that they can buy a home and pay
very close to (or even less than) what they are paying for rent. In fact, it is
usually a good idea to meet with a mortgage lender early on in the process and
tell him or her how much you would like to spend per month for housing. This can
frame your search, as a mortgage lender can tell you exactly how large a
mortgage you can carry for that monthly payment.
Also, there are many state programs that will provide financial
assistance to help with the down payment and closing costs. This can really tip
the scales in favor of buying versus renting.
Building Home Equity
In addition to finding a home similar in monthly costs to your rental payment,
you'll also benefit from the equity that builds when you own your home. When
making a monthly rent payment, you are paying for the right to live in your home
for a period of one month. At the end of the lease you have nothing to show for
it, other than the fact you had a home for that period of time (which of course
is a great thing).
Home owners build equity as the amount they owe on their home decreases and the
value of their home increases. This equity can become a major factor in their
overall financial picture. The ability to take out home-equity loans and other
lines of credit against the value of the home is a major financial benefit of
owning a home.
Ability to Easily Move
Some people who consider renting over buying a home point to the fact that
they can move more readily if they rent rather than being tied down to owning a
house. Of course, the fact that leases lock a renter into the rental for a
defined period of time disputes that notion. In fact, many people have found
they can move more quickly and easily if they own a home by either renting it or
selling it when they want to move, without worrying about breaking a lease or
losing security deposits.
Tax Benefits of Owning a Home
The tax benefits of owning a home are substantial. It's a good idea to speak
to your accountant or tax advisor about the financial benefits of owning a home
and paying a mortgage (instead of paying a lease on a rental). Typically, the
interest on a home mortgage is tax deductible. Monthly rent payments are not.
Also, after a certain age, people who sell their home in certain instances do
not have to pay a capital gains tax on the profit. Check with your tax advisor
for all the pertinent details.
Homebuyers who benefit from tax deductions and can build equity more rapidly in
their home. This gives people greater financial flexibility and more
Putting it All Together
Most people who choose renting over buying make the decision
based on incomplete information. The best thing to do is research your options,
speak to professionals, and then make an informed decision on whether or not you
should rent or buy your home. After research, you may still feel renting is
better for your particular situation. But most people will find the decision is
fairly obvious and will choose to buy their own home.
It is highly recommend that you also visit the
First Time Home Buyer Grants page
for free assistance with the down payment. This will make it possible for many
people to qualify for a first time home
buyer loan who wouldn't have qualified without the grant assistance.
Also visit the First Time Home Buyer
Programs page for other types of 1st Home Buying assistance.