Renting vs. Buying
Like other major life decisions, choosing whether to rent or own is a question of weighing the options.
Why Buy a Home? New homeowners soon realize the enormous practical and psychological advantages to owning rather than renting. Besides freeing yourself of the uncertainties of dealing with a landlord, as a homeowner, you'll be the one to decide on remodeling or improvements. Rather than endlessly paying money to someone else, when you invest in a home and make improvements to it, you'll be the one to profit from it when you resell. The pride of owning your own home will dramatically affect the way you feel about your choices and your future. The amount you put down on a home, called "equity," grows as you make mortgage payments. A portion of your mortgage payment will go toward the interest of your loan and part will go to pay off the amount borrowed, the "principal." Each month, your equity grows while the balance shrinks. Since home prices have been steadily increasing over time, this also adds to the value of your equity. Homes historically appreciate faster than the rate of inflation, so owning a home helps you keep up with inflation. It will also help reduce your income taxes, since you'll be able to write off most mortgage interest and property taxes (please see your tax accountant). The first property you buy may not fit the definition of your perfect dream home, but improvements you make plus appreciation will one day provide you with the equity you'll need to afford your dream. The payments you make, unlike rent, will end when it's paid off. So as a form of monthly-enforced savings, making payments on a home today can assure a secure and rent-free retirement. Home ownership is sound investment strategy for the future. Other Factors Of course, buying a home isn't strictly a financial decision. For most of us, the thought of constantly worrying about losing our security deposit every time we pound a nail or paint a wall isn't particularly appealing. Here are some other things to consider before making your purchase: This may sound simplistic, but first and foremost you should find a neighborhood and a home that you just plain like. Moreover, you should check on the sales price trends of homes in that neighborhood. If it looks like the area is declining in value, then avoid commitment: You're probably better off renting. Finally, don't forget that even with the tax-breaks of home ownership, you will still be incurring out-of-pocket costs that you wouldn't encounter as a renter -- from the cost of ripping down wallpaper to repairing a leaky roof. So before you buy, estimate how much those costs will be. After all, you don't want to live hand-to-mouth - even if it is in your own home. |
