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The Advantages and Disadvantages of Buying or Renting a Home
June 3, 2016
Buying a home is a important decision that everyone must do. But what do one do if they can't buy a home right now? Maybe renting a home is an option. Either way, each option has their pros and cons. Here are just a few of them. Sources: here & here
Advantages of Buying:
Advantages of Buying:
- The cost of owning a home can be less than the cost of renting.
- The buyer has “forced” savings, which can be important when the buyer pays down the balance by a substantial amount.
- The buyer experiences tax advantages. Property taxes and interest can be itemized for tax deductions.
- The buyer controls the property. They have the freedom to change the home as much as they want.
- There are a fewer rules that the home buyer must abide by, which includes restrictions as far as pets, children, and noise goes.
- When mortgage payments are made on time, the homeowner can achieve a better credit rating
- Greater privacy.
- Homes typically increase in value, build equity and provide a nest egg for the future.
- Your costs are predictable and more stable than renting because they’re ideally based on a fixed-rate mortgage.
- There’s pride in home ownership.
- Home ownership is a long-term financial commitment.
- You’re responsible for all maintenance on your home. No landlord to depend on.
- Owning a home ties you to your community, making it more difficult to suddenly pick up and leave a location.
- Although mortgage payments are usually fixed, they’re generally higher than rent payments.
- Buying a home requires a down payment, closing costs and moving expenses.
- The value of your house may not increase – especially during the first few years.
- Borrowing against your home equity, to help you with a debt consolidation, for example, can leave you ‘house poor’
- The initial investment to rent a home or apartment can be quite low.
- Renting a home can be cheaper than buying a home. The funds that would normally be used can be invested into savings accounts.
- Your landlord is responsible for performing nearly all maintenance and repair work on the property.
- The renter has less of a tax impact on their financial situation and is not impacted by such items as property taxes that can fluctuate often.
- The renter may be able to budget easier. Rent is an amount that is fixed and may even include utilities in the rental amount.
- The renter has more mobility and flexibility to move since leases tend to me short-term. Most leases are for 12 months. So, if your job requires you to move frequently, renting can be a desirable alternative to owning.
- Insurance costs are lower for renters because the renter only needs to insure the contents of the rental property and not the structure itself.
- You won’t be able to claim any deduction for mortgage interest and property taxes when you file your tax returns.
- Your housing costs aren’t fixed like they are with a fixed-rate mortgage. Your rent will most likely grow from year to year.
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