Renting vs. Buying

Should you buy or rent? If you have been renting for a while, your immediate thought may be that if something breaks you can simply call the landlord to fix it, but not if you own the home. When making a decision if you should rent or buy, you need to also take the following information into consideration:

Tax benefits: Tax write-offs of mortgage interest can be among the biggest financial benefits of homeownership. Homes typically appreciate in value over time as well. You should evaluate how long you expect to stay in your home. If you anticipate staying for several years, then you should purchase a home as the financial gain from ownership is likely to outweigh the initial costs to get in the door.

Build equity: If you are renting a house, you may already feel like a homeowner by making routine repairs or doing yard work. The main difference between renting and owning is that when you own you are building equity in your home with each monthly mortgage payment. The rent you are paying is producing a zero future financial benefit for you. In fact, you building equity for your landlord. Since homes typically increase in value over the long term, a home provides not only a place to live but should also provide a return on your original investment.

Will I become a victim of the foreclosure mess? Remember, foreclosures only account for a small percentage of homes. Lenders have stricter enforcement on qualifying buyers for a mortgage. Lenders also require you to demonstrate strong basic borrowing credentials such as proof of income, credit score and ability to make a down payment.

Should I wait for the market to bottom out? Typically not, when you take into consideration the other benefits discussed above. In addition, most rent prices are higher as there has to be a profit margin between the mortgage and the rent amount for it to be beneficial for a landlord to own the property. In most cases, your monthly payment will be less or the same as your current rent (after taxes and insurance). Of course, this depends on the size and price of home you are wanting.

Isn't it cheaper to rent? Typically not, when you take into consideration the other benefits discussed above. You would be responsible for insurance, but even if you are renting you have typically been paying renter's insurance. In addition, most rent prices are higher as there has to be a profit margin between the mortgage and the rent amount for it to be beneficial for a landlord to own the property. In most cases, your monthly payment will be less or the same as your current rent (after taxes and insurance). Of course, this depends on the size and price of home you are considering purchasing. Compare the numbers using the Rent vs. Buy option in our Calculator