Real Estate – When to Buy vs When to Rent
Many individuals are confused when deciding whether to rent or buy the home that they will live in. There are advantages to both renting and owning, and oftentimes consulting with a professional money manager is the most reliable way to determine which is best for your particular situation. In fact, many money managers have been reporting that consumers are considering purchasing homes like never before due to the all-time low mortgage interest rates in the housing market right now. Let’s take a look at the pros and cons of both renting and buying to help you make a more informed decision.
Pros and Cons of Renting or Leasing Your Home
At some point in life, nearly everyone has been a renter, and renting is advantageous for many people. Young adults, single persons, and students often find renting is their best option, as do those people who are planning to relocate to another area in a very short time period. Renting definitely has its pluses, including almost zero liability for repairs and maintenance to the home. In addition, renting your home allows you to be more flexible when you need or want to move because it is easier to get out of a lease than it is to sell a home (especially with the global economic downturn). Perhaps the most important and relevant advantage to renting is that the renter does not have to be out a lot of money upfront to have a place to live. Inversely, renting your home means that you will have less control over the property itself, and landlords are often less than expedient when doing needed repairs. If you are a pet lover, many landlords will not allow pets, making it difficult for you to find a suitable place to rent. When discussing the disadvantages of renting or leasing your home, well-informed money managers will advise you that there are no tax benefits for renters, and you are not building equity like you would if you owned your home.
Pros and Cons of Buying Your Home
Owning your own home is a liberating experience that is considered to be part of the “American Dream”. Owning your home has so many obvious advantages – freedom and control of your living space and surrounding property and the ability to decorate and do landscaping that suits your personal tastes are among the first that come to mind. Home ownership says “you’ve arrived”, and gives you a sense of security and peace of mind that renting can never provide. However, if you talk with a money manager, he or she will tell you that the financial advantages of home ownership are what make owning a home worthwhile. As a homeowner, you will receive a tax deduction for mortgage, property, and interest taxes paid on your home. Every year that you own your home, you will be building up financial equity. Most homes increase in value over the course of time, which makes owning a home a great investment in your future. And with home ownership, the money that you pay to your mortgage lender (assuming you finance the home) will be going towards the home’s equity, instead of in the landlord’s pocket. On the negative side of home ownership, you must consider that you have less freedom to move if the need arises and that you will be responsible for maintenance, repairs, and upkeep to the home. You will also need to pay for home and property insurance, and possibly mortgage insurance (depending on the type of mortgage that you take out).