How to Decide Whether to Rent or Own a Home

The last four years have really been an uncertain time for homeowners who had to watch the value of their home take a very unpleasant roller coaster ride.  For those just entering the market, it makes you really question whether or not you want to commit to spending so much money on a home that may lose value.  On the other hand, you might have put off buying a home for a while and now you can purchase the home of your dreams at a fraction of what you expected to pay four years ago. Renting or Owning a Home: Many Factors to Consider! The question of renting vs. buying a home is one that my wife and I worked through a couple years back.  The decision to rent or buy a home really depends on a variety of factors, so hopefully these points will help you to decide whether to rent or own a home. Viewing Housing as an Expense Before we cover any of the pros and cons of renting vs. buying, it’s important to recognize that your house payment is an expense.  Sure, the home might go up in value and yes you will probably build up equity in your home, but there is no guarantee. The absolute best way to approach your decision to rent or buy is to realize that the payment to live with a roof over your head is an expense.  Whether you choose to pay rent or pay on a mortgage, you are getting shelter in exchange for your payment.  It’s a basic necessity of life and should never be viewed as ‘throwing money away.’ Why You Might Want to Rent What’s your time frame? Did you know that the average time to sell a home is 10 months ?  That’s a long time, especially if you only plan on being in the home for 3-4 years.  The risk of having to make two payments because your home isn’t selling is a reality for too many people today.  Renting gives you the ability to walk away without a large mortgage payment looming over your head.  If you are only going to be in an area for a few years, it might not be worth the risk of buying a home. Do you need to stay mobile? What life events do you expect to have in the next three years?  Does your job occasionally relocate people?  Do you expect to have a baby soon?  Do you want to go back to college for a professional degree?  These are all great goals that shouldn’t be overshadowed by the idea of homeownership.  In other words, don’t let these goals take a back seat because you bought a home and it’s taking longer to sell than you anticipated. Why You Might Want to Buy Great prices on homes If you know that you’ll be in an area for while, you might be able to find a home at all time lows.  For someone prepared to buy a home, it might be a great time to get a home at an exceptional price. Another plus to buying in today’s market is that you can get a mortgage at a very low rate.  A 30 year mortgage on BankRate.com is around 4 percent!  It is the cheapest money mortgage holders have seen in a long time. You might even be better able to pay off your mortgage early  with rates this low! Potential tax deduction and equity There are also benefits of buying a home that you don’t see when you’re renting.  Some people may be able to deduct the home mortgage interest from their taxes.  For those who take the standard deduction, the mortgage interest deduction doesn’t help you. As for building equity, it’s something that takes a while to do.  In the first five years of paying on a mortgage, nearly 80% of your payment goes to interest!  That makes it difficult to look at the argument of building equity as a reason to buy, so consider it a fringe benefit if you decide to take out a mortgage. Cons of Renting a Home While you have flexibility when it comes to moving, you will have restrictions as a renter.  Many landlords do not allow you to paint or remodel your rental home, so you have to follow their rules if you want to live there. Of course, you’re not building equity as you pay your rent to a landlord, so you won’t get any money back when you move. Cons of Buying a Home You are responsible for everything in your home, so be prepared to pay more than just the mortgage payment each month.  Property taxes, home insurance, renovations, and repairs can really take its toll on your finances.  It’s recommended that you set aside at least 15% each year of your mortgage to cover unexpected expenses and repairs for your home. At the end of the day, the three biggest considerations you need to make in your decision to rent or buy are time, savings, and flexibility. What factors contributed to your decision to rent or buy the home you’re in right now? Leave a comment below! Related Articles: 7 Reasons to Rent Instead of Buy a Home Renting Versus Buying A Home Pros and cons of buying vs. apartment renting 5 Questions to Ask When Deciding To Refinance Your Home Loan Tim is a personal finance writer at Faith and Finance a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK or Catan. Find him on Twitter and Facebook .

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How to Decide Whether to Rent or Own a Home

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