Purchasing a home is often one of the largest financial decisions a person ever contemplates. There are often numerous considerations to be made, each of which may be encumbered with a cost. Buying a home can be complicated; however, renting, also presents its own unique challenges.
Owning a home isn't necessarily a one-size-fits-all proposition. If a home buyer is undecided, short on funds, or uncertain about their future, renting may be preferable. Conversely, if a prospective home buyer has the financial means to maintain a home, is well established in their career and desires an opportunity to experience the many benefits afforded through home ownership, making the decision to purchase may prove well-supported.
Do homebuyers pay more upfront?
Home buyers and renters alike each have initial cost considerations that must be taken into account when searching for a home. When purchasing property, prospective home buyers must pay earnest money deposits, down payments, home inspections, appraisals and other line items connected to the purchase transaction. But, when renting property, prospective renters must pay security deposits, first month rents and potentially other deposits. Either way, there are up-front costs incurred.
Does the benefit of equity outweigh the risk?
One of the greatest benefits afforded to homeowners is the potential to build equity. Admittedly, homeowners also run the risk of financial loss should the housing market experience a downturn. Although renters won't reap the benefits from increased equity, they also won't encumber the risk of owning a depreciating asset should the economy take a turn for the worse. Needless to say, there are a multitude of differing factors that can influence the appraised value of home over time. Good or bad, those factors will likely have a greater impact on a homeowner's financial position as compared to that of a renter.
But home ownership also offers significant tax benefits as owners are afforded the ability to itemize their tax returns, deducting mortgage interest and property taxes from their federal tax obligations. However, unlike homeowners, renters are not permitted to deduct their rental obligations.
Creative Freedom vs. Freedom from Maintenance Costs
There are ongoing maintenance and repair costs associated with home ownership. When something needs to be fixed, repaired or replaced, the responsibility generally lies with a homeowner and not with a renting tenant. But owning a home provides homeowners with a significantly greater degree of creative freedom to make changes to the home that otherwise aren't typically granted to those bound by the terms of a lease.
Renters are afforded the opportunity to change their living arrangements far easier than those who own a home. But, once established, home ownership can be rewarding, giving homeowners an opportunity to set roots within their communities.
Real estate agents well-versed in sales and rental options can help prospective buyers understand the advantages and disadvantages inherent in making the decision to rent or buy a home.
Sean and Aimee McDonald can be reached at 775-250-8335 or firstname.lastname@example.org.