Renting Vs. Owning

As the market continues to move steadily into a solid recovery, many long time renters are beginning to weigh the pros and cons of home ownership. If you are considering buying now to take advantage of the historically low interest rates, here are some of the elements you should be considering:

Advantages to Renting

Renting is a relatively low risk commitment – you can’t be forced into foreclosure (although your landlord can…), there is no risk of home price depreciation, and you save on a lot of additional costs such as property taxes and overall maintenance. As a renter, you are free to move or downsize whenever necessary, and generally renters feel less stress about the general upkeep of the property. Rentals sometimes include “free” amenities such as a pool, gym, laundry and security. Money that would go into a down payment when buying can now go into other more immediate investment opportunities.

Disadvantages to Renting

As a renter, you are at the mercy of the property owner, so you are subject to set rules, regulations and limitations. In today’s market, many renters actually pay more per month in rent than they would for a mortgage payment. While a down payment is not required, landlords may require you to provide the equivalent of three months rent up front – which can come close to equaling a small down payment. Rental money never comes back to you, and the payments never stop. In fact, many landlords will raise the rent over time. It’s also possible that the owner may sell a rental home without alerting the tenant, who can then be required to leave the property with 60 days notice – so renting is generally thought of as being a less stable and more temporary living situation.

Advantages to Homeownership

Many of the advantages to homeownership are ingrained in us early on. (It’s the American dream! It cultivates pride of ownership and a sense of accomplishment!) Owning your own home means that you are free to do whatever you want to the property – you can remodel, expand, or tear down. You are free to have pets, and to paint the rooms any color you like. Your monthly mortgage payment is building you home equity that you may be able to borrow against in the future. As your home appreciates, your potential for selling your home for a profit grows. That investment may allow you to trade up to a bigger or better home in the future. If you choose a fixed rate mortgage, your month payments will never increase. And unlike rent, once you’ve paid off your mortgage, your payments stop! Homeowners have access to tax benefits that are not available to renters – they are able to write off their property taxes and the interest paid on their mortgage. Factoring in this tax benefit often makes the overall cost of a mortgage less than that of a monthly rental payment. Right now, interest rates are at a historic low – making a mortgage the cheapest loan available. Lastly – owning a home gives you the opportunity to become a landlord yourself and bring in income from your investment.

If you are interested in learning more about the pros and cons of renting vs. buying, feel free to contact me! It’s a great time to consider your options.