When you’re getting ready to move or thinking about becoming a homeowner, it’s important to weigh the pros and cons of buying vs. renting a home.
There are a few major factors you should think about when deciding to buy vs. rent your next home.
• Cost — Generally, renting is cheaper and has lower barriers to entry than buying a comparable home in the same area.
• Timeline — If you’re planning to move in a few years, it may be more beneficial to rent. A rule of thumb is if you plan to purchase, it’s best to be committed to living in the home for at least five years. But if you’re going to stay somewhere for five or more years, buying makes more sense if you can afford it.
• Flexibility — If you purchase a home, you will not have the same flexibility to pick up and move if you’re transferred or you lose your job.
• Homeownership — When you are purchasing a home, there is going to be upkeep and maintenance. Do you have the time and money?
Stephanie, a real estate agent, explains: “Homeownership isn’t for everybody. If you’re only going to be living in the place for maybe one or two years, you probably shouldn’t buy. If your job is not secure or there’s anything on the horizon in that arena, maybe it’s best to wait. You want to be secure financially and you want to make sure that you’re going to be able to sustain the payments comfortably, and that you’re going to be able to maintain and hold onto the home.”
If you’re leaning towards homeownership, here are a few advantages of owning a home you should consider:
• Tax benefits (mortgage interest is tax deductible)
• Building equity
• Stabilized payments (whereas a landlord could raise your rent)
• Permanent place for you and your family
• Sense of community
STEPHANIE: Home ownership isn’t for everybody. If you’re only going to be living in the place for maybe one or two years, you probably shouldn’t buy. If your job is not secure or there’s anything on the horizon in that arena, maybe it’s best to wait. You want to be secure financially and you want to make sure that you’re going to be able to sustain the payments comfortably, and that you’re going to be able to maintain and hold onto the home.
STEPHANIE: From a purchase standpoint, over three years, if you’re spending, you know, however much in rent a year, it could be twenty, thirty thousand dollars a year times two or three years–$100,000 dollars? Do you want to give that to someone else, or do you want to put that towards your own future? I say put it toward your own future.
GEORGE: Some of the potential deductions when you buy a home would be the interest, of course, on the loan that you paid, the mortgage insurance. Premiums are now deductible. The property taxes are deductible. The other nice thing is it’s usually the largest deduction somebody has, which may allow them then to itemize deductions where they’ve always had a standard deduction. Once they itemize another deduction such as charity, your state taxes that you pay, donations can be deducted also, so it increases your deductions quite a bit in a lot of cases.
RHONDA: And you build equity in something. You build capital. It’s basically a built in savings plan that should you need; you can take money out; you can do things of this nature, versus paying somebody $1,000.00 a month and all you get is a receipt. So I definitely suggest everybody, if you can, purchase something. Start somewhere.
TIANA: There’s nothing like having my own home. It is completely different than renting and I get really excited. I mean, he probably doesn’t know this but every time I come home and I’m pushing my button to my garage, I get really excited because it’s mine.