Should I buy a home or continue to rent is a common question asked by many people considering homeownership. Homeownership can be a very rewarding and beneficial achievement, but there are also responsibilities that go along with homeownership. Renting a home or an apartment is basically similar to "throwing money out the window". While there is less responsibility with renting you are also not investing into your future. With homeownership you are able to make your monthly housing payments while building equity into your home.If you want to purchase a home, but do not have to worry about some of the normal upkeep issues you may want to consider purchasing a townhome. Your monthly association dues typically cover things such as lawn maintenance, snow shoveling and plowing, roof and siding upkeep, etc. For many people a townhouse is a nice way to gain the benefits of home ownership, while taking out some of the upkeep responsibilities associated with a typical home.
When comparing renting to buying, many people look at the rent they would be paying now vs. the house payment they would be making now. There are 3 other financial factors to be considered-
- Most home owners benefit from a mortgage interest deduction on their taxes. This amount varies based on income levels, other deductions, and monthly interest amount, but a moderate income home buyer with a $1300 a month payment could typically save a couple hundred dollars a month in taxes.
- With a fixed rate mortgage your monthly principal and interest payment won't go up for 30 years. If you continue to rent however, expect your rent to rise 3-4% per year. So, if you were paying $1000 a month in rent compared to $1000 a month house payment, in 10 years your house payment would be $1000 or your rent payment would be $1410 after a 3.5% increase per year.
- Well maintained homes will generally increase in value over time. A $150,000 home over 10 years could increase in value to $222,036 (a $72,000 increase) by appreciating only 4% a year. Compare that to renting, where if you move out after that 10 years and have done a really good job of cleaning, you will get most of your security deposit back.
There are
significant tax advantages gained when buying a home -vs- renting. For a full understanding of how owning a home can benefit your tax situation, consult your CPA or accountant.
If you prefer to not have to worry about fixing anything, then renting is probably the best option for you. If you rent most management companies take care of any problems that might arise while you live in your apartment. If you are the homeowner, then it is your responsibility to make any necessary repairs throughout your home.
When deciding if renting or buying is your best option you should
analyze your current lifestyle and the trends in the market in which you live in. What is good for some people is not always the best for you if you are not committed to all the responsibility of home ownership. Owning a home is making an investment into your future and should not be taken lightly. Home ownership is a step which can benefit you greatly, or if you do not take the home ownership seriously it can ruin you for a long time.
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