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Renting vs. Owning

Have you heard people say, “If you can pay rent, you can pay a mortgage?” Owning a house, in the long run, is cheaper than renting. Your expenses will be higher during the first few years, but you’ll have more tax deductions. Over time the value of your home may increase and you can use that value to pay for things like education. You’ll also save on taxes and have more stability. Renting doesn’t have the same benefits.

Take a look at the benefits and drawbacks of renting vs. owning:

Pros of Homeownership

  • You can build equity. Over time, your home may increase in value and your mortgage debt will go down. The difference between what you owe and what your home is worth is called equity.
  • You can borrow against that equity or take it all when you sell your house. Most people build wealth through home equity. You don’t have to sell your house to benefit from equity. You can borrow against it to pay for things like education and medical emergencies.
  • You can reduce your taxes. Your mortgage interest and property taxes can be deducted from your income taxes. This could save you thousands of dollars every year.

Cons of Homeownership

  • You become the landlord. If something breaks, you have to fix it. A leaky roof or new plumbing can cost lots of money, so you should be prepared to pay for the ongoing maintenance of your home.
  • You may pay more than renting. You don’t just pay a mortgage − you also pay property taxes, homeowner’s insurance, and possibly mortgage insurance. Some of these costs are rolled into your monthly mortgage payment, but be prepared for other expenses.
  • You can’t move as easily. Getting out of a lease is a lot easier than selling your home. If you get a job in a different city or state, you have to think about what you will do with your home.