Rent VS Own

Many consumers are finding themselves jumping into home-ownership quicker than they may have been planning due to the fact that renting costs are rising rapidly in a number of cities nationwide while mortgage rates are remaining fairly low. On the other hand, some still choose waiting for the housing market to recover even though there are enticing incentives involved with buying. There is actually no correct answer involved in the battle between buying a home and renting a home.

There are numerous considerations, as well as pros and cons on either side of the fence when anyone gets involved in this all-important question of rent vs own. The most significant factor of all would most certainly be your personal financial circumstances.

PROS:

• Avoiding ownership of an asset that is depreciating- In spite of the fact that home prices have not only stabilized, but are even rising in the majority of housing markets, an increase in value is not guaranteed.
• An easier move- Switching to a sublet or month-to-month lease is quite a bit simpler in the event that a relocation opportunity presents itself, like a job offer in another city, state or even some other country.
• Maintenance not required- If something breaks, all you have to do is call your superintendent or property management company rather than having to fix it yourself.

CONS:

• You’re not building any equity- Renting gives you someplace to live, but you also have no saleable asset when you move out.
• The monthly payment could go up- Rental prices have risen in a number of cities, which means that you could face an increase at the end of your current lease.
• No tax benefits- If you own your own home, your payments for mortgage interest are tax deductible along with your property taxes. This creates a reduction in your home ownership costs. On the other hand, as a renter, you don’t get any federal tax deductions for housing costs.
• You would need the property owner’s approval if you wish to do any painting or remodeling- It’s true that certain landlords will allow painting, but you will generally need a color consultation with them and their permission. Any other changes, like appliance upgrades, usually require submitting a request to the landlord or property manager.

PROS:

• Stable Housing Payments- When you pick a fixed-rate mortgage, payments will stay the same for the entire loan term. However, property taxes and your homeowners’ insurance could change.
• Building equity-Historically, homes have been rising in value from about four percent to six percent each year. Even in the event that your particular home didn’t increase in value, you’d still build up equity if the property simply holds its value.
• Homeowners’ tax breaks- You can deduct your property taxes and interest on your mortgage if you itemize your deductions. The deductions that you get could offset your housing costs.
• Your home could become an investment- Let’s say you purchase a home and then move out for some reason. In that event, you could use it as a rental property, thereby generating income. This is only effective if the rental payments will at least cover the mortgage. If this is a possibility, choosing a property that could become a profitable rental in the future is a good idea.
• Settling in a community- It’s a fact that, once you own your own home, you usually tend to get involved more in the local community, since you are planning on being there for years. You have the opportunity of getting to know your neighbors, volunteering for community or school projects and joining a homeowners’ association.
• You’re free to decorate your home as you wish- Changing your home whenever you want is one of the best things about home-ownership.

CONS:

• Any home might lose value- There are no guarantees of a value increase.
• You’ll be paying for you own home maintenance- You’ll have to spend money and time to keep up your home and should set some funds aside for covering maintenance expenses that could be unexpected, like window replacement or appliance repairs.
• A home is not a liquid asset- If a job relocation or some other change were to come up, selling your home quickly might not be possible, or you might end up accepting an offer that is lower than what you want
• You’ll have to pay property taxes- They could go up during any year, which would make the home less affordable.
• Home-ownership means making a cash investment- You could end up spending your entire savings on the closing costs and the down payment. Those funds then become unavailable to utilize for investments.

Here are a few critical areas to consider when making the choice between rent vs buy:

1. Amount of time that you expect to live in the home
2. Your future plans
3. The cost of buying
4. Calculating your costs
5. Your ability to finance purchasing your home, including:
   1. Income
   2. Ratio of debt-to-income
   3. Assets
   4. Credit score

The choice to purchase a home is a key decision in life and you don’t want to take it lightly, however rising rental costs and lower interest rates on mortgages could offer more affordability on the home buying front. It’s important to take into consideration all of the pros and cons related to both owning and renting. Long-term home-ownership could be effective in building wealth, which could then be utilized for funding a college education or your retirement. It could be end up being a savvy financial move for you if affording your housing payments is comfortable for you and you feel that you are ready for committing to home-ownership. And if you decide that you are ready, give me a call so that I can help you to realize your dream of buying a home. I’m here to help you even if you haven’t made your decision yet and need help with some of the above calculations.

If you have questions or would like to explore the real difference in renting or owning give us a call today. (949) 929-2270 | Ron@RonEvansRealty.com