To Rent or Buy: Navigating The Crossroads of Homeownership

Are you facing a complicated decision to rent or buy a home? If yes, you are not alone. Since starting my career in the financial services industry, I am often asked questions about the real estate market. In some regions, the cost of renting a home exceeds the mortgage payment, while in others it is the opposite. Because of this, many people ask, “Should I rent or buy?”. When deciding if renting or owning is right for you, it’s important to consider the various factors involved in each, some of which are listed below.

Factors to consider when Renting:

Advantages:

1. Deposit: You don’t usually need a large down payment to rent a house. However, a security deposit is required, which is often returned at the end of the contract.
2. Liability: Responsibility is limited to the tenant, and maintenance and repairs are the responsibility of the landlord.
3. Taxes: Property taxes and school taxes are paid by the landlord, not by the tenant.
4. Portability: If you live in a rental, moving is usually easier. However, it’s important to pay attention to when the lease ends and when you can move into your next property.

Disadvantages:

1. Rental Costs: When the lease period expires, the landlord has the ability to increase the rent.
2. Ownership: Since tenants are not property owners, they are not able to make any changes to the property.
3. Equity: As a tenant there is no ownership in the property, therefore no equity is being built.

Factors to consider when Buying:

Advantages:

1. Mortgage Payments: When you buy a property, you incur a fixed annual mortgage payment. With the exception that the house is in escrow to pay property taxes.
2. Ownership: You are the owner and have full control over any updates or changes you wish.
3. Equity: Homeowners build equity by investing in properties. This equity can then be borrowed against for renovations, updates, and more.
4. Tax Credit: Interest paid on mortgage payments is deductible using itemized deductions.

Disadvantages:

1. Deposit: Buying a home usually requires a large down payment. The average buyer pays 20% of the purchase price when trying to get a mortgage. Because it is such a large sum of money, many people cannot afford a home.
2. Liability: Homeowners are responsible for performing necessary maintenance and repairs on their homes.
3. Taxes: Property owners are responsible for annual property and school tax costs.

Considering this information, keep in mind that each situation is different and this information alone may not help you make the right decision for you. It is important to consider your lifestyle, personal goals, and financial situation when making effective decisions. Given the current market conditions, this decision can be stressful. Contact one of our advisors for a no-obligation discussion to address your concerns – (607) 936-3785.