Rent vs. Buy: How Should I Live?

The purchase and ownership of a home is still “The American Dream”. But as the average American family changes residence an average of once every five to seven years, an interesting and very important question arises which begs to be addressed. That question is “Should I buy, or should I continue to rent?”

In the days of our parents and grandparents, families had one home. They paid off their 30-year mortgage, gained clear title to their home, and continued to live there. But as times have progressed, families have become more and more “nomad-like”, picking up and moving whenever their circumstances dictated. Job relocations, educational requirements, neighborhood and community changes and a myriad of other factors have all contributed to the phenomenon of America on the move.

There are clear advantages and disadvantages to both buying and renting. So how do you decide which option is best for you? Well, determining how long you intend to live there might give you some insight into which circumstance would be the most prudent for you financially. Of course, there are numerous other factors which must be considered when making this decision. But as our Buy-vs.-Rent Calculator shows, the length of time that you remain in a dwelling tends to have a direct impact on its financial advantages or disadvantages.

There are, of course, some major perks to owning your own home. For example, you are gaining something, equity in your home, with every monthly payment. You can redecorate, renovate, remodel, or expand to suit your needs and desires – building even more equity if done properly. And there can be definite tax advantages to home ownership; consult your lawyer or accountant for more detailed information concerning your specific circumstances. On the other hand, initial down payment money needed to purchase a home can be prohibitive. Depending on home values in your area and other factors, your equity could go up, or down. And if any repairs need to be made, you are generally responsible for making or paying for them.

Renting usually requires less money initially, perhaps first and last months’ rent and a security deposit. If anything goes wrong, the landlord must make the repairs, thus saving out-of-pocket cash for you. You cannot lose any equity in the property because you don’t own it. However, you cannot ever gain any equity for the very same reason. The money that you spend is simply for rent, and buys nothing else. Also, you are usually very limited in what improvements you are allowed make to the dwelling. And any tax advantages belong to the owner of the dwelling, not the renter.

This is, or course, not an exhaustive list of the advantages and disadvantages or renting as opposed to buying. It is meant only to give you a general idea of each situation. You must weigh all of these factors with regard to your own personal circumstances in order to decide which is ultimately best for you. Use the handy Buy-vs.-Rent Calculator to help you. Do not, however, forget to factor into your decision one major intangible on the side of buying which cannot be quantified by any number -- Pride of Ownership.