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Renting versus buying a home
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With today's historically low interest rates and
flexible loans, a monthly mortgage payment can cost no
more than a monthly rent check. So, why rent when you
can buy for the same price?
For starters, It's not that simple. While owning a
home has many benefits -- and they’re not all
financial -- the cost is more than simply the mortgage
payment. So which option is right for you? It depends on
your financial situation, your plans for the future and,
perhaps most importantly, the lifestyle you prefer.
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| Buying |
Renting |
Potential tax break
You can usually deduct mortgage interest on your tax
return, which can mean big savings. If you’re in a 28%
tax bracket and have a $150,000 mortgage at 7%, the
first full year you own your home you’ll most likely
be able to deduct more than $10,000 in interest. That
translates into a tax savings of almost $3,000. In
addition, even if you sell your principal residence for
more than what you paid, you may not have to pay capital
gains taxes. (There are limits, so consult a financial
advisor for advice on your particular situation.) |
Less financial pressure
Low mortgage rates have, in recent years, narrowed the
gap between the cost of buying and renting, but the
overall cost of renting is still usually less.
Insurance, taxes, utilities and maintenance can add 40
percent to a homeowner's true monthly expenses. The
upfront costs of renting -- typically just first and
last months?rent -- may also be much lower. |
You can build equity
No matter how much rent you pay, 100 percent of your
apartment still belongs to your landlord. But every time
you make an amortized mortgage payment, you own a little
more of your house. Initially, interest makes up the
vast majority of your payments, but the proportion is
constantly shifting in your favor. If real estate values
rise, you’ll be even farther ahead. The longer you
plan to stay put, the more of this benefit you will
reap. |
Fewer responsibilities
Make no mistake, owning a home involves a lot of time,
energy and money. Some problems, such as a leaky roof or
broken furnace, can end up costing thousands of dollars.
When you rent, that's someone else's problem.
Renters also avoid the stress that can come with
carrying a large mortgage, including the worry that the
housing market may take a downturn. |
Pride of ownership
A house may be an investment, but first and foremost
It's a home for your family. Even without the
financial benefits, many people like the stability and
sense of pride that comes with owning a home. You can
renovate it to suit your own needs, plant a vegetable
garden in the back and let the cat scratch the walls
knowing there's no landlord to impose his or her
rules. |
More freedom
Many people feel tied down by the idea of a 30-year
mortgage. Even if you would like to own a home
eventually, renting may be a better option if your
short-term future is uncertain; for example, if your job
is not secure enough for you to take on a long-term
commitment, or you’ve recently moved to a new city and
you’re not sure whether you’ll stay. When you do
decide to move, you won’t face the commissions, taxes
and other fees associated with selling a house. |
Use our free mortgage payment calculators:
1.How much do I have to earn?
Not sure how much money you'll have to earn to afford your house payment and accompanying expenses?
2.Mortgage payment calculator
Want to know how much your monthly payment is for your mortgage?
3.Bi-weekly mortgage calculator
Want to know how much time and money you'll save paying off your loan on a bi-weekly payment plan?
4.Additional payment calculator
How much do you save by paying more or making additional payments than your initial mortgage terms?
5.How much can I borrow?
Want to know how big of a mortgage you can take on?
6.Should I pay discount points?
Not sure if you should pay discount points on your mortgage loan?
7.How much will I save by refinancing my loan?
How long will it take to recoup the costs of refinancing my home mortgage?
8.How much will my tax deduction be?
Want to know how much your home mortgage will save you in taxes?
9.APR calculator
To find out the annual percentage rate of your loan, enter the loan amount, interest rate, points, other costs and year-length term.
10.Interest only monthly payment calculator
To find out the monthly savings you could gain from an interest-only payment plan.
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