Is It Better to Buy or Rent a House?
Home ownership isn’t always the best choice
For people who’ve never owned a home, the relative cost-effectiveness of buying and renting is a frequent concern. Understanding the benefits and the risks of both options can help people make the right decisions. There was a time when buying was almost always considered to be the better choice, but today this is not always so.
Before you decide whether to buy or rent
Once upon a time, homeowners enjoyed mortgage payments that were equal to or, in many cases, less than rental payments on comparable houses. Times have changed, however, and so have rent and mortgage prices. Today, because so many factors are involved there’s little consistency to be had in answering the question of whether it’s best to rent or buy. To take just one example, in the past, people tended to live in the same home for thirty years or more. This made home ownership a wise choice for many.
For people who work in fields may require them to relocate in the next three to five years, or for people who have goals of moving to an area where homes are more expensive, buying now may not be the best option. However, for those who plan to live for the next several years in an area where they can currently afford to buy, then buying may be the better choice. Naturally, in any given situation, the decision depends on many factors other than current market prices and job stability, but considering a purchase under these circumstances makes good sense.
Prospective home buyers should also consider ownership costs beyond a mortgage, home insurance, and real estate taxes. When those costs are factored in, the cost of owning a home can far exceed the cost of renting one. Maintenance costs may include:
- Gardening and landscaping
- Homeowner association fees (when applicable)
- Routine maintenance (painting, cosmetic updating, etc.)
- Major repairs and remodeling
For those who wish to avoid these additional costs or who determine that they cannot afford these costs on top of monthly mortgage payments, insurance, and taxes, home ownership may not be the choice.
Home ownership is often provides special tax breaks. For instance, homeowners are able to deduct the interest paid on mortgages loan from their taxable incomes. When the interest paid on a mortgage is sufficient to allow a homeowner to itemize deductions, the tax savings can be significant. Before purchasing a home, it’s a good idea to calculate anticipated tax breaks resulting from payment of mortgage interest. Homeowners may also benefit from other deductions, such as property taxes.
The final analysis
In many cases, home ownership can offer financial savings and stability. However, it’s not necessarily the best choice for everyone. When considering whether to buy or rent, each person must weigh his or her own personal pros and cons in addition to the general considerations mentioned above.