Choosing Between Buying a Home or Renting

Choosing between buying a home or renting can be a stressful decision. Carefully considering your circumstances will bring peace of mind.

Choosing between buying a home or renting can be a stressful decision. Carefully considering your circumstances will bring peace of mind.

Deciding between buying a home or renting is an important decision in those first years of marriage.  Questions like  “is it cheaper to buy or rent?” and “when to buy or rent” are crucial when considering your family’s specific circumstances.

Buying a Home or Renting: Benefits of Buying

Sixty-eight of American adults are home owners. Many see value in the various financial benefits: tax deductions of interest paid and property taxes; fixed rate mortgages (instead of the usual increase in rent over time). Not to mention that houses usually increase in value over the years, making the purchase a comparatively predictable investment. Likewise, homeowners benefit by knowing that they are paying off their own mortgage and building equity, instead of paying off their landlord’s mortgage. And as long as mortgage payments are made on time, credit ratings can also improve.

Homeowners also take pride in their ownership. Knowing that you and your family can make every decision regarding the house gives a sense of responsibility and accomplishment. Many homeowners end up passing their homes on to their posterity.  Another emotional benefit is knowing that you can have a say in community decisions. Owning a home and voicing opinions show local politicians that you are an active member of a community and your voice should be heard.

Couples must choose between buying a home and renting.

Many couples find that renting is best for their specific needs.

Buying a Home or Renting: Benefits of Renting

Making the decision of whether it is better to own or rent can depend on several variables, and for some, renting truly is the best option. Even though home owners can usually get a a fixed-rate mortgage, the monthly payments are usually more expensive than monthly rent payments. Potential buyers need to know that they can make monthly payments in full and on time so that their credit builds and so they can keep their house and build equity. Failing to make monthly payments gives banks the liberty to take a home away.

If a homeowner lives in a home only a few years they will make little progress toward paying the home off or building equity, particularly if they only make minimum payments.  Because the payments are less expensive most homeowners choose a 30 year mortgage.  With a 30 year mortgage most of the payment goes toward interest in the first few years, and little towards the principle of the loan.  Over the life of a loan, many people end up paying three times more than the house is worth because of the interest charges. It is for this reason that housing experts recommend that homeowners pay more each month than the minimum payment or consider getting a shorter term loan if they can afford it.

Even though buying a house can be a good investment, this is not always the case.  Sometimes the house market experiences  unexpected booms and homeowners can sell and make profits when they least expect it. But often, depending on the length of the loan and a low housing market, some homeowners end up having to pay more to the bank instead of making a profit. Homeowners often fear having to sell their houses when the going prices for homes are low.  Death, divorce, job loss and other unexpected life events  occur and many have no option but to sell when the market is low.  Unlike renting, where contracts usually last a year, homeowners can not simply pick up and leave if they need to. Potential home owners cannot foresee all of the future costs and benefits, but choosing between buying a home or renting can become easier to assess by making  reasonable estimates of ability to pay rent or mortgage,  desired length of stay, and willingness to maintain the property.

Articles About Renting vs Buying:

Buying a Home or Renting Worksheet

Lease or Buy Home Pros and Cons

Buying and Renting Property Advantages

Top Benefits of Owning Home

The Debate Between Renting and Owning