Buying Vs Renting
Challenging economic times call for clear thinking and a well-thought out plan for financial survival. One key decision for many is the question of buying or renting a home. Each path has its benefits and short-comings. Here are some factors to weigh in order to determine which option may be best for you.
The advantages of renting are generally tied to short-term considerations. Monthly rent is generally less expensive than a mortgage on a comparable home. The associated costs that can go with home ownership (upkeep, property taxes, homeowners’ insurance) are avoided. Purchasing a residence inevitably also requires a cash down payment, which routinely runs several thousand dollars. Renting is also a good option if you don’t expect to live in a residence (or possibly an area) for an extended period of time. It generally takes a few years just to recoup the outlay of closing costs alone.
Benefits for homebuyers are usually more long-term focused. Monthly payments build financial equity, which can be accessed in the short-run for loans and other needs, and can accrue in the long-run to add to the value of your financial status. Particularly in the early stages of home ownership, there can also be a notable tax benefit, tied to interest deductions. There’s also something to be said for the emotional satisfaction of home ownership.
Finally, although personal stages of life are often the greatest factors, financial variables such as loan rates and the recently passed first time homebuyers' $8,000 tax credit can sometimes come into play. As a very general rule, if monthly cash flow is a serious concern, renting is probably a better option. If you’re in position to build for the future, work on setting aside down payment money and consider home ownership.