Renting VS - Buying A Home

Perhaps the idea of buying a home pops into your head when you least expect it: you look at the bare, white walls of your rental apartment and suddenly wish you could paint them bright blue. A vexing dilemma? Not really, but you may have subconsciously started wondering whether you should buy a home of your own.

Most people have strong opinions when it comes to the "rent or buy" question—some suggest you're crazy for throwing money away in rent; others insist you'd be reckless to invest too much cash in buying a house. In general, there's no clear answer as to whether you should rent or buy—it all depends on your specific situation. You should keep your financial position foremost in your mind; you should also think about where you are in life and where you plan to be several years from now.

One of the biggest advantages to renting a home is that it allows you to remain mobile. A renter has no long-term financial obligation for housing, which makes it easier to move in order to follow careers or a wild sense of wanderlust. If you don't want to stay in one place for several years, it's a good idea to put off buying a home for awhile. Likewise, renters have very little to worry about when it comes to property values and don't have to worry about sinking a large amount of cash into appliances or home improvements. On the downside, renters aren't building up their net worth—the money they pay for rent is going into someone else's pocket and won't financially benefit the renter in the long run.

If you do plan to live in an area for several years and have enough cash for a down payment, buying a house may be a smart move. In fact, federal tax rules generally favor homeowners with mortgage interest and property tax deductions, so the financial benefits of owning a home are greater than with renting. Likewise, homeowners can build equity, giving them even more incentive to invest in real estate. Although the original costs (like down payments and closing fees) can become expensive, owning property has distinct advantages over renting. The only flip side is if you find an apartment that rents for much lower than market value and allows you to invest your money elsewhere.

When deciding whether you can afford to buy a house, it's a good idea to know what type of property you want to buy (such as a house, condominium or townhouse) and sit down with a financial planning expert to figure the costs of buying versus renting. An expert can help you look at your income and your debts to determine whether you can afford a mortgage payment. After that, it's up to you to decide if you're financially—and emotionally—ready to buy your first house.


© 2002 Don Marland