Buy or Rent?
To buy or rent, that is the first question.
If you are currently renting a home or apartment, you may be considering whether or not it would be advantageous to buy. Though the economy has changed dramatically in the last several years, many people still consider owning a home part of the American dream, whether or not they consider it the investment opportunity that it was when real estate prices were climbing rapidly. Here are some things to think about as you weigh the rent vs. buy decision:
- Renting provides flexibility – to easily change jobs, to change cities, or even to test out an area to see if you really want to live there long term.
- Renting has less financial risk – should you experience a change in job status – and/or if you haven’t yet put away a good rainy day fund to cover unexpected financial challenges, renting may be a better bet. When you rent, you avoid many of the extra expenses that come with home ownership, like maintenance, property taxes, some of your utilities, etc.
- Renting means less “house work” – your landlord takes care of the yard, the leaky faucet, and more.
- Renting often provides amenities – like a swimming pool, a fitness room, or a playground.
- Buying provides “home ownership” – instead of paying rent simply to have a place to stay, your monthly payment is buying your home. While many people whose homes lost value in the recession will tell you that a home is not always an investment, home prices have been increasing steadily over the last several years – but mortgage rates are still very low – making ownership affordable and allowing homeowners to build equity faster than when mortgage rates were much higher. (Much more of your mortgage payment goes to principal nowadays than when your parents were paying double digit mortgage interest rates!)
- You can borrow against the equity you build in your home at rates lower than most any other type of loan. Plus, you can receive a tax deduction. (Consult your accountant for details.)
- It’s yours! Paint it, decorate it, put nail holes in the wall – do all of those things you can’t do in an apartment.