The Pros and Cons of
Renting vs Buying
Advantages of Renting
- More fixed costs for the term of the lease
- Not gaining equity but not losing it either
- When the lease is up you can just move
- There is generally less work in maintaining an apartment vs. maintaining a home
- Smaller amount of "up front" cash
Disadvantages of Renting
- No matter what happens to the value of the home, you will never gain equity
- Limited to no availability to personalize your living quarters
- No tax advantages for renting - your landlord gets any and all tax breaks available.
Advantages of Buying
- Over time the mortgage balance decreases and equity builds, even if the value of the home does not increase
- The ability to remodel and redecorate the home to match your needs and desires
- There can be advantages attached to home ownership (consult legal or accounting advise for details in your (situation)
Disadvantages of Buying
- Equity may go up, down or stay stagnant
- If you want to move areas, you generally have to sell your house
- Work on the home needs to be done by you or some you pay to do the work
- Generally, a larger initial investment is required when you buy a home
5 Tax Breaks to Know About
- Home mortgage interest deduction
- Mortgage Points Deduction: Buying points to lower your interest rate on your mortgage (you must itemize your return to claim deduction, and the settlement statement must specifically cite these fees as "points").
- Property Tax Deduction: You can deduct Real Estate Taxes paid on a Primary Residence if you itemize your deductions
- Home Improvement: Tax Breaks with a Home Equity Loan
- Capital Gains Tax Exception: Available on your Primary Residence if you have lived there for 2 out of the last 5 years. $500K of gains are tax free if you file your taxes as married; $250K of gains are tax free if you file single on your tax return.
Financial Considerations
CONSIDERATION #1:
When owning a home, each monthly
payment is like putting money into a
savings account rather than giving it to
the landlord when renting
CONSIDERATION #2:
Buying a home is also accompanied by
some interesting tax benefits
What to Consider When Buying a Home
CONSIDERATION #1:
Buying a home means generating equity
CONSIDERATION #2:
Buying a home brings a sense of pride and ownership
CONSIDERATION #3:
Buying a home brings a realization that you are part of a permanent community in which you may be a contributor to the well being of others around you
Responsibilities Involved
RESPONSIBILITY #1:
As a tenant in a rented property, you have more freedom to move around the country
RESPONSIBILITY #2:
Many small improvements can add up to big dollars invested in upkeep expenses
RESPONSIBILITY #3:
If you find that you are not exactly thrilled with your new neighborhood, you may find yourself "stuck" until the value of your home increases enough to get your initial investment back
The Real
Cost of Renting
| If Rent is: | 1 Year: | 5 Years: | 10 Years: | 15 Years: |
|---|---|---|---|---|
| $800 | $9,600 | $48,000 | $96,000 | $144,000 |
| $900 | $10,800 | $54,000 | $108,000 | $162,000 |
| $1,000 | $12,000 | $60,000 | $120,000 | $180,000 |
| $1,100 | $13,200 | $66,000 | $132,000 | $198,000 |
| $1,200 | $14,400 | $72,000 | $144,000 | $216,000 |
| $1,300 | $15,600 | $78,000 | $156,000 | $234,000 |
| $1,400 | $16,800 | $84,000 | $168,000 | $252,000 |
| $1,500 | $18,000 | $90,000 | $180,000 | $270,000 |
| $1,600 | $19,200 | $96,000 | $192,000 | $288,000 |
| $1,700 | $20,400 | $102,000 | $204,000 | $306,000 |
| $1,800 | $21,600 | $108,000 | $216,000 | $324,000 |
| $1,900 | $22,800 | $114,000 | $228,000 | $342,000 |
| $2,000 | $24,00 | $120,000 | $240,000 | $360,000 |
