Buying vs. Renting a Home April 1, 2020


Housing: Rent vs. Buy | WHAT WORKS BEST FOR YOU

What Works Best For You:  Rent or Buy?

  • Let’s discuss housing:  rent vs. buy?
  • Your financial position and lifestyle will help determine what’s best for you.
  • If you choose to buy a home, how much you have saved and how long you’ll stay in one place are the biggest factors.
  • Owning a home provides:
    • Your home will generally increase in value
    • There are tax advantages
    • You can cash in on appreciation
    • You’re in charge of what you can do
    • It provides a sense of belonging and community
  • The true cost of home ownership is higher than many anticipate.
  • The question is, can you financially afford the buy a home?
  • Do you have enough money to set aside for unplanned expenses or temporary unemployment?
  • Will home ownership impact your lifestyle?
  • Renting a home provides:
    • More flexibility
    • Less financial burden
    • No responsibility for maintenance or repairs
    • No property taxes or homeowner’s insurance
    • Some utilities may be included
  • Whichever the case, choose what works best for you.

Housing: Rent vs. Buy

Rent vs. Buy – You Need a Place to Live


  • How long you plan on staying in your home has a huge impact on your decision.
  • When buying a house, it’s important that you plan on staying in the home a good length of time.
  • Moreover, you need time to reduce your debt and to allow for meaningful price appreciation.
  • If you’re planning to stay less than 3 years, it’s likely that buying a home will prove to be financially questionable.
  • You will also pay capital gains taxes on the sale if you hold it for less than 2 years.
  • Renting means you can move without penalty each time your lease ends.
  • Conversely, renting is temporary and is often subject to 30 day’s notice.
  • As a renter, falling home values and paying property taxes will not impact you.
  • In any case, the biggest myth about renting is that you’re “throwing away money” every month.
  • Not so – you need a place to live.
  • Whether you buy or rent a home, each has their advantages and disadvantages.
  • Still uncertain – try this calculator to see the difference it might have on your long-term finances:  SHOULD I BUY OR RENT A HOME CALCULATOR

Interesting Tidbit:  U.S. HOUSING COUNTRYWIDE

As Published byHOWMUCH.NET – Contrary to popular belief about rising home prices in major coastal hubs like New York City and San Francisco, conditions for home buyers are generally a little friendlier on the West Coast and the East Coast compared to the South or Great Plains.  In the South and Great Plains, it is still significantly cheaper to rent than to buy, often leading to savings of 33% or more on housing costs.

     Top 10 States/Territories Where Renting is Cheaper Than Buying

  • Puerto Rico – 85% cheaper to rent
  • Montana – 42% cheaper to rent
  • Wyoming – 40% cheaper to rent
  • Alabama – 39% cheaper to rent
  • Kentucky – 35% cheaper to rent
  • Louisiana – 34% cheaper to rent
  • North Dakota – 33% cheaper to rent
  • South Dakota – 33% cheaper to rent
  • Mississippi – 33% cheaper to rent
  • Rhode Island – 31% cheaper to rent

Housing: Rent vs. Buy

Let’s Run the Numbers

Housing: Rent vs. Buy | LET’S CALCULATE THE COSTS

    • Let’s determine the costs whether should buy or rent a house.
    • Enter your details into this MORTGAGE CALCULATOR to estimate your monthly mortgage payment with taxes, fees and insurance.
    • What is your debt-to-income (DTI) ratio, which is one of the determining factor when applying for a loan?  DTI CALCULATOR.
    • Buyers should not overlook some additional, hidden costs of ownership.
    • Once you own a home, you must budget for the cost of property taxes, insurance, and regular maintenance.
    • Consider the potential for unforeseen expenses, such as replacing a heating system or a roof.
    • Not enough for a 20% down payment, then you likely have to make private mortgage insurance (PMI) payments.
    • When purchasing a condominium, townhome or a single-family home in a planned development, you will most likely have homeowner or maintenance fees.
    • A low credit score could force you to pay a higher interest rate, and therefore pay more in interest.
    • If you’re not sure if you’re ready to buy a home, then check out this calculator:  HOW MUCH CAN I AFFORD.
    • Renting offers fewer upfront costs and paperwork.
    • If your landlord reports rent payments to the credit bureaus, you have more time to build your credit.
    • You don’t pay for maintenance, repairs.
    • If you’re thoughtful about your financial situation and your future, you can’t make a wrong decision.


Housing: Rent vs. Buy

Tax Credits Will Make a Difference


  • First, tax credits will offset some of the costs when buying a home.
  • However, recent tax law changes have lowered the cap on the amount of mortgage interest that can be deducted.
  • Before the tax laws, homeowners could deduct interest on $1,000,000 of debt on a primary or secondary home.
  • Now, for mortgages taken out after the new laws went into effect, deductibility is limited to the interest on up to $750,000 of debt on a primary or secondary home.
  • Interest paid on home equity loans or lines of credit is still deductible—provided that the money is used for substantial improvements to the home and that the total home equity debt plus mortgage is under the $750,000 cap.
  • Homeowners must itemize their tax deductions in order to receive the benefit.
  • Should your overall itemized deductions be less than the standard deduction for your situation, you may not be able to use this mortgage deduction.



Housing: Rent vs. Buy

  • Homeownership brings intangible benefits such as a sense of stability and pride of ownership.
  • It also brings the tangible ones of tax advantages and equity.
  • Consider the down payment and associated closing costs; do you have enough funds?
  • Will you have enough money leftover as an emergency fund to pay for unexpected repairs or loss of employment?
  • Renting offers flexibility, predictable monthly expenses, and no responsibility for maintenance or repairs.
  • Renting may not make any money, but you’re not going to explicitly lose any either.
  • Contrary to popular belief, renting doesn’t mean you’re “throwing away money”.
  • Ultimately, the decision depends on your individual circumstances and what works best for you.