Rent or Own a Home? Which is right for you?

2009 December 19

In determining whether to rent or own a home, you must factor in your financial state, comfort level, and stage in life. If you’re at a stage in your life where you are financially secure, have a big savings, and ready to start a family, it’s almost always better to own your home rather than to rent. Being a homeowner, you will be building equity, benefit from tax deductions on your mortgage interest, and room for your family to grow.

The feeling owning a home is great because you feel it a place you can really feel it your own to do whatever. However, owning a house is not always the best financial choice. Renting a home, apartment, or condo makes more financial sense than buying a home, if you plan to live in an area short-term or interest rates are high, and property values are falling.

Choosing whether to rent or buy is a complicated and often emotional decision. In either case, it is important that you understand how to make the most of your housing decision to protect and grow your money.

Making the decision to either rent an apartment or buy a home involves much more than simply comparing rental rates, mortgage payments, lease lengths and tax breaks. The right decision depends on a combination of personal finances and goals in your life, now and in the future.

Reasons to Rent

In cases where your best option is renting:

Your savings account is not enough for a down payment. If that is the case, renting is most likely your best option.

Renting provides a greater amount of flexibility. You don’t want to tie down in one area for the long-term. You need the freedom to move easily to another city.

You don’t have the responsibility of maintaining a home. Your landlord must maintain the premise and supply the appliances. When you own a home and you’re not handy to fix things around the home, it will cost you to hire a professional.

Don’t have to pay property taxes. No home insurance to pay.

Reasons to Own a Home

There are advantages of home ownership. You can enjoy a level of independence and freedom not possible when a landlord is in control of your living space, meaning you decide whether to have pets, tear down a wall, repaint your home, or plant a garden.

Each time you make a monthly mortgage payment, you build equity in your home, which can be converted to cash by refinancing or selling your property. You’re not throwing your money away.

Over time real estate properties appreciate in value, so your home becomes an important asset protecting your wealth from inflation.

You benefit from the tax benefits of mortgage interest and property tax deductions.

Rent or Own

Advantages Disadvantages
Rent
  • Flexiblity (can relocate easily)
  • Put your money into better investment returns
  • No maintenance cost
  • No capital at risk
  • No property tax
  • Rent increases, you have no control
  • No equity
  • No tax benefits
  • Risk of eviction
Own
  • Tax break (deduct mortgage interest and property tax)
  • Build home equity
  • It’s your castle. You’re in control.
  • Emotional satisfaction, freedom, stability
  • Home value fall, loss of equity
  • Maintenance cost
  • Property tax
  • Less flexibility should you want to move
  • Mortgage, typically cost more monthly than rent
  • Risk of foreclosure

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