While finding shelter is an essential need for most people, you must consider the long-term financial commitment of renting or owning. For starters, everyone will have unique needs, circumstances and financial resources. Therefore, owning a home may not be the right move for some people but the perfect move for others. If you make the decision to purchase too soon your quality of life may suffer. The key is to purchase a home when you are truly ready.
Key Benefits of Renting
- You are not required to make a large down payment
- You are not responsible for maintenance and repairs
- Often some, if not all, utilities are included in rent
- You will not lose money if the housing market declines
- You do not have to find a seller when you are ready to move
Key Benefits of Buying
- When your home appreciates you build equity
- You can deduct mortgage interest and property taxes on your income tax return
- You may be able to exclude capital gains on the sale of your home
- You often get more living space in addition to a yard
- You can borrow against the equity in your home
- You can increase your credit score if your mortgage is paid on time
Now that you know the benefits of renting and buying, it is just as important to understand the disadvantages. Understanding both will help you make an informed decision.
The main disadvantages of renting include: you build no equity and thus will never see a return when you move; your ability to decorate and personalize the dwelling is very limited; no tax write-offs; and your rent will generally increase yearly or at the end of your lease.
The main disadvantages of buying include: your home value could decline, which will result in a loss of revenue; when you are ready to move you have to wait until your home is sold; you are responsible for maintenance and the general upkeep of the home; and you need a sizable down payment to move in.
Dwelling Styles
Whether you decide to rent or own, your choices are pretty much the same. You can dwell in the following shelter types: house, condo, apartment or co-op. With the exception of an apartment, you are able to rent or own each of these.
Conclusion
Most financial planners would recommend buying a home, if you can afford it, as you have tax and interest write-offs as well as a wide range of other deductions. In addition to the write-offs, buying helps you to build good credit and helps to improve your overall financial position.