Buying vs Renting

Here are some of the major advantages of buying a home, as well as advantages of renting:

Advantages to Buying:

• Equity You build up equity, or ownership, in your home over time as you pay off your mortgage, as long as your home is appreciating in (or at least maintaining) value. Having to make monthly payments becomes a form of forced savings.

• Price appreciation If you buy wisely, and your home is well maintained and in a good location, your home's value is likely to appreciate over time. Homes also provide one of the best hedges against inflation.

• Personal taste You can remodel your home to suit your needs and tastes. You are unlikely to do the same for your rented home since improvements are at your expense but ultimately benefit the owner.

• Sense of community Owning your home gives you a deeper sense of commitment to your community. Wanting to maintain property values, homeowners tend to take better care of their homes than renters. They also tend to be more involved in neighbourhood and community issues.
  Source of borrowing. Your home can be a source of cash in the future. Whether you decide to take out a home equity loan or reverse mortgage loan, your equity in the home is available for you. Interest on most home equity loans is also tax-deductible.

Advantages to Renting:

• Lower share of income Costs of home ownership-ranging from the down payment to monthly mortgage and maintenance expenses-take a large bite out of your household budget. Many people sacrifice their entire lifestyle by sinking half or more of their income into home ownership costs. If you can rent for 30 percent or less of your income, you may find yourself less stressed by doing so

• Price depreciation Prices of homes may fall in your neighbourhood. By renting, you will not be hurt by eroding real estate values. Once you think the local real estate market has "bottomed out," you can get a better deal if you choose to buy

• Alternative investments Money you save by renting can be invested in stocks and other securities, which may be appreciating at a faster rate than home values. If you are disciplined with such investing, you may be able to build up your personal net worth faster this way

• Control of living expenses You may be able to avoid a rental increase by moving or negotiating with your landlord in the event rents rise in your neighbourhood. On the other hand, with an adjustable-rate mortgage, there is no way to avoid higher monthly payments that come with higher interest rates

• Relocation-friendly If you anticipate relocating several times with your career, it may make more sense to rent. Unless your local real estate market is extremely active, you probably cannot expect enough appreciation in a year or two to compensate you for the significant transaction costs of buying and selling a home.