Buying a home is 45% Cheaper Than Renting
The most important housing decision that most consumers face is whether to rent or buy. So, to help them with this decision, I took a look at the key market factors affecting homeownership. First off, asking home prices have started to rebound, and have risen by 2.3%. However, rents have risen by 4.7%. This means that prices are lower relative to rents than they were a year ago. More importantly, mortgage rates have fallen. Based on asking prices and rents during 2012 buying is now 45% cheaper than renting in the 100 largest US metros. By Jed Kolko Chief Economist for Trulia.com
56 Considerations if you’re thinking of buying versus renting……
Rent Advantages
May be cheaper than a mortgage payment
Fewer (if any) maintenance costs
No down payment is required (less deposit)
No real estate taxes (renters insurance optional)
Less stress (who cares, it’s not yours!)
Freedom to move or downsize when necessary
No risk of home price depreciation
Some utility bills may be included
“Free” amenities such as pool, gym, security
Money can be used for other, more profitable investments
Can’t be foreclosed on
Rent Disadvantages
Rental payments may exceed the monthly cost of mortgage
No ownership or wealth creation
Payments never stop when renting
Rent will rise over time
Must deal with a landlord or management company
No tax benefits
Rules, regulations, and limitations
More temporary, less stability
Always at the mercy of the property owner
Pets may not be allowed
Ownership Advantages
You can build home equity and wealth
Status- Status-Status
Sizable Tax Deductions possible
Your space, your rules, pets are welcomed
Ability to remodel, expand tear down
Pride of ownership
Potentially better for children – family structure
Mortgage can improve your credit history/score
Ability to borrow against your home (HELOC or cash-out)
No more monthly payments once the mortgage paid off
Fixed payments (if you choose a fixed mortgage)
Mortgages are the cheapest loans available
No landlord
Can exclude capital gains when you sell (partially)
Inflation hedge
Can rent out to others
Can sell and use proceeds for bigger/better home
Retirement nest egg
It’s the American Dream!
Ownership Disadvantages
Home prices may lose value
Could overpay for your property
Obtaining a mortgage (and finding a home) is a hassle
Not everyone qualifies for a mortgage
You must pay taxes and homeowners insurance
Total housing payments can be more expensive
A mortgage payment can rise (if an ARM)
A sizable down payment is necessary
Maintenance costs can be excessive
Pricey HOA dues (if applicable)
You’re “stuck” in a home (long-term commitment)
Increased liability and responsibility
Transactional costs of buying and selling
Ownership is stressful!
Taxes and insurance generally rise
Your home can be damaged or destroyed (and not fully insured)
Can be foreclosed on and lose your home
