Why Buy at All?
While home ownership in the United States has dropped a bit since 2007, over 60% of Americans own their own home. They do so for many reasons, but here are a few:
- Control of your environment. Homeowners set their own pet policies, smoking rules, determine their own decor, maintain the property at the level they wish, all with minimal interference. Renters have to ask permission of their landlords for a host of things, and live with many things that are not the way they really want them. You can also be pickier in selecting a place initially, since there are far more homes for sale than for rent at any given time.
- Equity. Homeowners achieve equity by paying off their loan, as well as appreciation. Home equity is the number 1 asset most people have at retirement. Renters have boxes of receipts, in many cases totaling much more than the cost of a home.
- Stability. Homeowners move when they want to. Renters may have to move whenever the landlord decides not to renew their lease, when the rent gets too high, or when they can’t stand the level of maintenance the landlord has decided on.
- Taxes. Homeowners take advantage of 2 of the most important tax benefits left in the US Tax Code for individuals. Mortgage interest (the largest portion of a house payment) is tax deductible. The gain on the sale of a primary residence is generally not taxable. For equivalent income and housing expenses, renters pay much higher taxes.
- It’s Easy. You’d probably be surprised to discover that in many cases, buying a home is easier than renting one. Landlords want to know more about you than banks these days. And with 1st months rent, last months rent, and deposit all being pretty commonly due BEFORE you move in, many times you can buy a home with a comparable house payment, with less cash out of pocket to move in. There are so many different ways to buy with no down payment, saving for a down payment is of far less use than having good credit scores.
Is It Ever Better to Rent?
Like everything, there are always exceptions to the rules. The best reasons to rent would be:
- You are planning on moving in less than 2 years. It generally takes 2 -3 years for buying to be advisable, because it costs money to sell, and you need some appreciation time to cover the cost of selling.
- Your job, credit or other circumstances are in the middle of major change. If you are just months away from a major promotion, it sometimes makes sense to wait so that you can afford something closer to what you really want. The same is true of credit score issues, if you have issues that can result in major improvement in your credit scores by waiting a little while, it is often better to fix your credit first, and then buy. Visa versa, if you may be in for a negative change at work, it may make sense to “ride it out” and make sure you will still be able to afford a place.