Whether to rent a home or to buy one? There are advantages to both. Homeowners can choose to paint their walls bright orange and no landlord can tell them no. They can take income-tax deductions for the mortgage interest and property taxes they pay. And, of course, they might make a profit when they sell.
Renters, on the other hand, don’t have to deal with headaches such as fixing a broken water heater–maintenance and repairs are the landlord’s problems. Renters have the flexibility to move easily. And their monthly rent is usually quite a bit lower than mortgage, property tax and insurance payments.
For many, this last point is the deciding factor. Yes, the tax breaks help lower the overall cost of ownership. But that doesn’t help the renter who simply can’t afford mortgage and insurance payments, either because of a low income or other financial priorities, such as caring for an aging parent or private-school tuition.
At that point, the choice of living situation “is really about spendable income,” said Barbara Steinmetz, a certified financial planner in Burlingame, Calif.
In general, buying a home makes sense for those who:
– Plan to stay in their homes for at least four years or more, according to some experts.
– Can afford the monthly mortgage payments, insurance and property-tax costs.
– Are reasonably sure their employment and income are secure.
More Top Picks Sony Mdrex15ap
– Are ready to accept the responsibility of home maintenance and repairs.
– Recognize that homeownership might involve compromise–that the home you can afford might be smaller, older or in a less desirable location than the apartment you rented, but it also has potential as an investment.
In general, renting a home makes sense for those who:
– Think they may want to leave the area in a few years.
– Like the flexibility of being able to move easily and the lack of responsibility for maintenance.
– Don’t have the cash flow to pay mortgage payments, insurance and property taxes, or don’t think their jobs are secure.
– Don’t want to or cannot reduce other costly expenses, such as travel.
“Lack of down payment” isn’t listed as a reason to remain a renter because there are many loan programs these days that require very little or no down payment. In many cases, the borrower’s ability to afford the monthly payments and a good credit record are all that’s needed to qualify for a mortgage.
Steinmetz, the financial planner, reminds prospective home buyers of some of the other costs of owning, in addition to the mortgage payments and property taxes.
Homeowners also must pay for home insurance and possibly flood insurance. A home has maintenance needs–roofing, plumbing, yard care–that you’ll either need to pay for or do yourself. A home will probably cost more to heat or cool than an apartment does, she adds.
“Homes have responsibility,” Steinmetz said. “Along with that joy go a few a negatives. If the plumbing bursts, it’s your problem; if you have termites, it’s your problem. And you need to be prepared for these contingencies.”
These Web sites have rent vs. buy calculators:
– www.eloan.com
– realestate.yahoo.com
– www.ginniemae.gov
– www.quickenloans.com
———-
Edited by Lara Weber ([email protected]) and alBerto Trevino ([email protected])