Extremely low mortgage rates and rising apartment rents in many cities have led some people to dive into homeownership more quickly than they’d originally planned. However, others are choosing to wait until the housing market recovers, in spite of the incentives to buy. The truth is, there’s no one right answer when it comes to determining whether to rent or buy a house.
There are a number of considerations you must make when making this decision. Renting and buying both present a number of pros and cons, and your own financial situation may be the biggest factor of all.
Pros & Cons of Renting
No Maintenance Is Required. If the garbage disposal breaks or you need a plumber, getting maintenance is as easy as calling the superintendent.
It’s Easier to Move. If you are not settled into your career or could have an opportunity to relocate in the near future, it is much easier to switch to a month-to-month lease or sublet than it is to sell your home.
You Can Avoid Owning a Depreciating Asset. While home prices have stabilized and are rising in most housing markets, there’s no guarantee that your home will increase in value over time.
You Don’t Build Equity. When you rent, your housing payment provides you with a place to live, but will not provide you with an asset to sell when you are ready to move.
You Don’t Receive Tax Benefits. Homeowners can deduct their mortgage interest payments and their property taxes from their federal income tax, which reduces the final cost of homeownership. Renters cannot deduct any of their housing expenses.
You Can’t Paint or Remodel without the Owner’s Approval. While some landlords are kind enough to let you paint your apartment, you’ll have to get their permission and consult on the color.
Pros & Cons of Buying a Home
You Can Build Equity. Historically, homes rise in value anywhere from 4% to 6% per year. Even if your home doesn’t increase in value, though, you’ll be building equity as you pay down your mortgage as long as your home maintains its value.
You Can Take Advantage of Tax Breaks for Homeowners. Homeowners can deduct their mortgage interest payments and property taxes when they itemize their federal income taxes.
Your Housing Payments Will Stay Stable. If you choose a fixed-rate mortgage, your principal and interest payments remain the same for the duration of the loan. However, your homeowners’ insurance and property taxes can change.
You Have to Pay for Your Own Maintenance. As a homeowner, you must spend time and money keeping your home in good repair. You need to set aside funds for unexpected expenses, such as appliances that break, a service contract on your furnace, or the need to replace your windows.
Your Home Is an Illiquid Asset. If you would need to sell because of a job relocation or change in your circumstances, you may not be able to sell your home as quickly as you would like or for as much money as you want.
You Must Pay Property Taxes. Property taxes can go up, making your home less affordable.
Buying a home is a major decision that shouldn’t be taken lightly, but when faced with rising rent and low mortgage interest rates that make purchasing more affordable; you should take the time to consider the pros and cons of both renting and buying. Long-term homeowners, even those whose homes lost value during the recession, can build wealth that can be used to fund their retirement or pay for college. As long as you can comfortably afford your housing payments and are emotionally prepared to commit to homeownership, buying a home can be a smart financial move.
Do you own your own home, or do you rent? Tell us what was the biggest factor in your decision?
Author:Kimberly Tapscott Phone: 203-252-8327 Dated: May 22nd 2015 Views: 108 About Kimberly: ...
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