Renting vs. Buying: Which Is Right for You?

When deciding whether you should be renting or buying a home, there are several factors you should consider.

Renting
The Disadvantages of Renting
As a renter, you have to pay so much every month for rent, but that money never goes toward ownership.

Also, you're making rent payments, not mortgage payments. Therefore, you can't deduct mortgage interest from your taxes.

Renters generally aren't allowed to fashion their living space to their preferences, like putting in different flooring or putting up wallpaper.

Noisy or nosy neighbors can also pose more of a problem since, in most apartments, you share walls with them.

The Advantages of Renting
Renters generally don't have to do the work in maintaining the place. They don't have to fix the water heater or a leaky faucet. Repairs are taken care of by the landlord.

When the lease is up, renters can just move out. You don't have to take care of making sure someone else is going to rent that space.

Lastly, up-front costs can be less when renting than with buying. You generally only have to put up the first and last month's rent plus a security deposit. After you're done renting, you get that money back provided the place is in acceptable condition.

Buying a Home
The Disadvantages of Homeownership
While historically, home values across the country have risen, there's always a possibility that home values in a local area may fall.

If you move, you have to arrange for the sale of your home.

It's also your responsibility to maintain the home and bear any costs for repairs.

The Advantages of Homeownership
When you buy a home, part of the money you pay towards your mortgage every month gets applied toward your principal. This means you build equity every time you make a mortgage payment, until you eventually own your home outright. There are also tax advantages to home ownership-mortgage interest is tax deductible*.

Homeowners also build equity through appreciation. Your home is typically your largest financial asset and the value can be positively affected by factors like home improvements, inflation and the demand for land.

Another advantage to buying a home is that you don't have to have a large amount of out-of-pocket up-front costs. There are loan programs that allow you to buy a home with little or no down payment. There are even loan programs, such as interest-only loans, that allow you to buy a more expensive home than you might have thought possible.

And because you own your home, you can design and decorate to your own taste. If you want to add an addition or remodel the kitchen, the only thing limiting you is your imagination. And the more you remodel and upgrade, the more you increase the value of the home.

Ultimately, it's up to you to weigh the advantages and disadvantages of renting and buying. You must assess your individual situation to see which makes more financial sense for you.

*Please consult your tax advisor.