Buying vs. Renting
For many of us, buying a home is the ultimate coming of age ritual. The transition from renter to buyer brings with it a number of financial, lifestyle, and status changes. The decision to buy your own home should be carefully compared to the option of renting.
The disadvantages of renting are many. Renters have very little financial control. Landlords can raise rents and tenants must choose whether to pay the higher price or suffer a move to a rental property that may offer no better value for a dollar. The cost of moving and disruption to family life, especially if there are children involved, may be significant. In addition, the tentativeness of renting leads many to feel unsettled and uncommitted to their community.
On the other hand, renting can have a number of advantages over owning a home. The most obvious benefit of renting is the added mobility for those who need or want it. Depending on your rental or lease agreement, you may be able to make a move quickly with little or no penalty. Renting can give you an opportunity to try out different neighborhoods and communities before you decide to buy a home.
And if a water pipe bursts causing major structural damage, your landlord pays for the repairs. Nevertheless, few homeowners yearn for the days when they were paying rent. Buying a home usually means obtaining a mortgage. Your cash down payment is your equity and a portion of each mortgage payment usually adds to your equity. With a fixed rate loan, your principle and interest payments never vary. No more rent increases. The cost of the interest on you home loan may be tax deductible as well. The homeowner’s interest payment deduction essentially means that the government is subsidizing a portion of your interest payment by waiving some of you tax obligation. Furthermore, the appreciation in value of your home is largely shielded from capital gains except in the ratified environment of multi-million dollar homes and multiple home ownership.
Appreciation also adds to your equity and you may be able to draw on the equity in your home to help meet future financial needs such as retirement or college tuition.
Owning a home can bring peace of mind and satisfaction. There are real reasons for these feelings. A homeowner has the satisfaction of decorating, remodeling and managing their home to suit their own needs. As a renter, many of these decisions may be made for you.
The more you pay in rent, the more likely it is that buying your own home makes financial sense. You should not feel like you have to make the decisions regarding homeownership entirely on your own. A real estate professional can be a valued advisor in helping you make the decision to move from renting to buying. Buying your first home may be easier than you think. In the final analysis, only you will know when the time is right.