Four Essentials to Help You Decide Between Renting or Buying

Owning a home is one of the great resulting products of the American dream. Part of having freedom, and the right to life, liberty, and the pursuit of happiness is being able to call objects that are the foundation of comfort and security one’s own. When an individual owns a home, they are given a strong sense of independence, security, and self entitlement. When one is renting, they write out a monthly rent check usually for as much or more of the amount they would be spending on their own mortgage. Writing a rent check out to pay for someone else’s increase in equity in the home they own can often be a frustrating experience. Why then, would anyone want to rent when owning is a possible option. Believe it or not, there are quite a few scenarios where renting is advantageous. The here are four discussion principles that hopefully will answer this question.

The first principle is the tax deduction verse closing cost. A homeowner does have the grand government gift of getting many of their expenses paid for. For example, a homeowner can deduct the amount of interest they pay on their monthly mortgage payment, they can deduct personal and real estate property taxes and a few other interest expense write offs. On the other hand, a home comes with a ton of closing costs. When an individual closes on a home, they will incur a myriad of costs associated with taking out a loan. These costs can quickly add up to more than two percent of the home. A home owner also has to take into account the fix up costs. When renting, the closing costs are non-excitant and the fix-ups all belong to the land owner. If the interest rates are even remotely high, then it could take several years for a homeowner to make up the closing costs.

The second principle to take into account is the costs associated with insurance and taxes. A renter will have neither to pay, a home owner has both. When homes close a escrow account is formed where every month the lender will collect payments and put them into a fund to pay the yearly insurance and tax payment. This can come to a hefty monthly load.

The third principle is the increase or decrease in the home price market. Traditionally, those who have owned a home have never been disappointed by a loss in appreciation for home markets. More recently, the nation experience a crises and the home prices plunged leaving many Americans under water. In times when the home prices are slowly and steadily growing, home ownership always pays off, whereas if they grow too fast and are sure to crash, one might actually consider selling and then renting for a while.

The final bullet point is freedom. When one is renting they are free to leave quicker, with almost a fraction of the hassle. If a school or neighborhood is going downhill fast, then the renter can move. If the job market is unstable, then renting will be much more advantageous than buying because of the high possibility of moving.

All said and done, if one is planning on living in the same spot for a while, then buying is probably the better option.

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