Pros and cons of renting versus buying

By Metro Creative Services

Buying a home is perhaps the single largest financial investment a person will make in his or her lifetime. That’s why if you are even thinking about buying a house, you need to do some research before plunging ahead. It’s a commitment that you need to be willing to make both financially and emotionally.

More often than not, buying makes more sense than renting for many reasons. Paying rent means giving money to someone else. Paying a mortgage means putting money into your own house. Rent traditionally increases each year, whereas a mortgage is a fixed or variable rate (unless you refinance). After considering the tax benefits available to homeowners, they generally come out ahead of renters in savings. In essence, the longer you rent without buying, the more money you lose.

Seems like a no-brainer in favor of buying, right? Not necessarily. Buying isn’t for everyone. If you can’t afford to finance the entire process, then it’s just not feasible. Consider that you will need a good amount of cash upfront to cover a number of expenses: the down payment; closing costs (which can start at $2,000 or more); taxes; insurance and inspection fees; points (a percentage of the mortgage) and other fees.

Of course, owning a home also means that you are in charge of that leaking roof, the lawn that needs mowing and a host of routine weekend jobs, especially if you own a single-family property. Some townhome communities cover external maintenance costs through association fees. Owning may also mean staying put for a while. If you move often or travel frequently, renting may be better (consider getting a roommate to split the rent and utility bills).

If you do decide to buy, you can get a reasonable mortgage by keeping your credit rating healthy. Do so by paying all your bills on time and in full for at least a year before you apply for a loan. It’s always a good idea to check your credit rating every six months from one of the numerous credit rate services out there (note that there may be a fee of $25 to $50 per credit check).

Even if the real estate market is good, be aware that if the market slips, you will end up with less equity when it comes time to sell. Consult your realtor for information on your region’s housing market. Then research your local economy. If more people are moving in than out, this could indicate better value appreciation for homes in your area.

While home ownership is a responsibility not to be taken lightly, the investment in your future makes ownership much more satisfying. With a little planning and prudence, there’s probably a house out there within your reach.