Your home is likely to be your largest expense. Whether you own or rent, the biggest portion of your paycheck is probably going towards keeping a roof over your head, keeping the water flowing and keeping the heat and lights on. When deciding whether to rent or buy your home sweet home, there are financial advantages and drawbacks to each one that you should carefully consider. Here are three arguments for each scenario.
1.) When you buy your own home, your monthly payments are going towards creating equity. Renters don’t have this luxury, so while your home is your biggest liability, in time it will become your biggest asset. However, along with paying down your principal, a significant portion of your mortgage payment is also going towards interest, insurance, taxes and other added expenses.
2.)Buying your own home gives you more flexibility in terms of utilities and other services. You can choose your electric, cable, oil or gas providers for yourself, and you have the freedom to shop around for the best price. Being the homeowner also gives you the ability to make upgrades on heating or cooling systems that can save you some serious cash.
For example, you could install solar energy technology on your roof, which according to professional York roofers, “can save a fortune in savings on a power bill in the long run.” This is modification you simply could not make to your residence if you were a renter.
3.) Being a homeowner also gives you significant tax advantages. Mortgage insurance is tax deductible and certain upgrades to your home will qualify you for tax credits. Owning a home often makes sense from a purely financial standpoint because of the tax advantages it can provide.
1.) The biggest advantage to renting is that you don’t have to worry about property taxes. While the town you live in may increase its property taxes on a regular basis, your lease prevents your rent payments from increasing along with the taxes. Once the lease expires, your landlord may want to raise the rent to make up for the difference, but you won’t have to worry about that right away.
2.) You aren’t responsible for emergency expenses like frozen pipes or a leaky roof. These emergency expenses can be extremely costly, and as a renter you aren’t the one who has to worry about the plumbers hourly rate in the middle of the night on Sunday during a snow storm. These emergencies can put a dent in even the most carefully calculated budget, so try to remember that when you are demanding money off your monthly rent due to a burst pipe or other problem that is outside of your landlord’s control.
3.) You won’t be stuck in a house when the economy goes downhill. The housing bubble and recession have shown property owners the real downside to owning a home. Underwater mortgages have forced many families to stay put, while their renter counterparts are free to move, pursue other opportunities or cash in on some great real estate deals.
Unfortunately, renters aren’t entirely immune to the economy’s woes. When the number of foreclosed homes spiked, many more families were suddenly thrust into the renting pool, creating a greater demand on rental properties. Because of the high demand and relatively low supply, landlords are able to charge higher rents, even to tenants that have lived in their apartments for a number of years. Once your lease expires, you may be feeling that the grass is greener on the other side of the fence.
Whether you decide to rent or own your next home, there are plenty of advantages to each one. The housing market is volatile, so take your time and think your decision through before making a move.