Tax and Money Tip this Week:
Should I Rent or Buy?
August 5th, 2015 | No. 244
Let’s take a look at some advantages to both Renting and Buying a home, while also listing some things to consider when making this big decision.
Buying has it’s benefits…
1- As rents rise over time, a mortgage can be locked in for 30 years with the payment remaining constant. This provides for a more stable financial environment.
2- Your home is an investment. As the property values rise, paying your monthly mortgage gives you the ability to build equity in your house instead of for your landlord.
3- Owning a home allows you the freedom to be creative and make improvements that will benefit your investment over time.
4- There are important tax advantages to owning. If you itemize, mortgage interest and property taxes are deductible items on your tax return.
Several disadvantages arise out of home ownership. It is important to carefully consider how long you plan to stay in the property. As the homeowner, you are responsible for maintenance to the property and for state and local taxes arising out of that ownership, if not managed properly, home ownership can lead to foreclosure or eviction, and thirdly, there is less mobility than when renting. It isn’t quite as easy to sell a home as it is to end a rental lease if necessary.
Renting may be more advantageous if you…
1- You prefer to have house maintenance issues handled for you.
2- Do not plan to remain in the area for several years.
3- You have bad credit and cannot buy
4- You have little in savings for a down-payment or home repairs
5- You require flexibility. Employment and financial stability are concerns for you.
Here are several items to consider for renters. There are no tax benefits and no investment equity is built up while you are renting. Also, you have no control over future rent increases and there is the possibility of eviction.
Questions or Comments?
Mark Vitek, CPA/PFS, CFP®
…until next week.