Buy a Home VS Renting a Home

Buying a home versus renting a home is one topic many have a strong opinion on. The baby-boomer generation in particular has a heavy bias towards ownership, where the next generation, which is generally more mobile in where they want to live, seems to have mixed reaction, perhaps from their parent’s heavy bias towards ownership and their own freedom that comes from renting. This is a tough topic and often one that comes down to personal choice. Our goal here is to look at “Buy a Home VS Renting a Home” from an unbiased perspective.

The first thing one must consider is immediate costs. Of course, if a person could sign a home today for the same cost as their rent, most would be inclined to do this. This is because even with some upgrade costs, they’ll still be building equity. The truth of the matter though, is most Americans are strapped for cash having more days left at the end of the month as there are dollars. So does it make sense to save for a house?

The answer depends on many more situations then we can include in a single article. Each person’s situation is unique, so lets now look at the benefits of renting versus the benefits of owning a home.

Benefits of Renting

Flexibility – As a renter it is much easier to just pack up and move. You’re not tied up in a long term loan or contract.

Repairs – When you rent a home, someone else does the repairs. If they don’t do them, you can simply move out and find a new place to rent, generally facing only a small termination fee for ending the lease early.

Employment Freedom – As a renter, a new job will less often result in a moving expense. When a home owner needs to relocate for a career move, it’s much harder for them to find a new place to live closer to their work.

Save money – Most often renting a home is cheaper than one thinks. There are benefits to saving all sorts of fees, such as property taxes, fees for homeowners associations, water bills, homeowners insurance, etc. Renters insurance is generally one-sixth the cost of home owners insurance, so you receive the same benefits as a home owner but for much less the cost.

Benefits of Owning

Tax Deductions – Home owners can write off many things on their taxes, including interest on their mortgage loan, home owners insurance, property taxes and more. There can be significant tax advantages for owning a home over renting a home.

Appreciation – While the value of a dollar generally depreciates, homes do the opposite (Appreciate) versus the dollar. The bottom line, homes generally hold their value better than currency.

Equity – This is the amount of value you have in your home beyond what is owed on it. For example, if a home is worth $250,000 and the remaining mortgage is $175,000 the owner is said to have $75,000 home equity. This often can be translated into buying power in terms of additional loans, and improved credit scores from having a solid payment history.

Security – Where the renter benefits from the freedom of being able to leave their home rather easily, a buyer benefits from security which is not the same as freedom. The security a home buyer has comes first, in that they know they’ll be able to live in their home for a long time, and second, by making timely mortgage payments, they’re building for their future. That future might be leaving the house to the children, selling the home in old age and living off the return, or using the equity for additional lines of credit.

In this article here we covered only a simplified example of what makes more sense, buying or renting. For more information on the topic, refer to the other links on our website.