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Advantages of buying a house instead of renting

 

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Are you deciding between renting or buying a home? Here are the advantages of buying:

  • Over time you will build equity - assuming that you include principal in your payments on your mortgage as opposed to making interest-only payments. If the house appreciates in value you build equity faster. (Contrary, if home values are falling, they wipe out a part of your equity.)
  • Buying is usually cheaper in the long run. In the first few years renting may be cheaper but over time the interest part of your payment should be lower than comparable rent.
  • As an owner you can modify the house to make it fit your taste and needs. No need to ask for permission to paint the childrens' rooms in blue or pink. And even if your landlord would give you permission to install a new kitchen or bigger bath tub, would you want to invest in his property?
  • in the USA, home owner ship is heavily sponsored by the tax code. Interest paid on an owner-occupied home is tax-deductible, meaning you pay the interest with pre-tax Dollars. Same applies for the annual property tax bill (which a renter would not have, of course!). There is currently a limit of $1,000,000 that you can deduct in mortgage interest per year. There is a discussion to lower this limit. If you sell the house with a profit, then the profit up to $250,000 is not taxed assuming that you lived for at least 2 years in the property. (But part of the profit is going to be eaten by the transaction cost like real estate commission, title company paper work, repairs to get the house ready to sell)
  • in California property tax is limited, so you may want to buy rather earlier than later to lock in at low prices and low property taxes
  • in an emergency you can get a second loan on your house until your situation has improved (imagine an unexpected doctor's bill in the 5-figure range)
  • Leverage: you can buy a house nowadays with as little as 5% down. This is not possible with many other types of investment. Imagine you buy a house for $600,000 with 5% = $30,000 down payment. If the house appreciates in one year by only 5% (current inflation) = $30,000 then you now have increased your equity by 100%. Of course leverage works the same way against you - if the house loses 5% in value then you just lost all your equity. This can be a little like playing roulette. Do not believe anyone who tells you that a certain property is guaranteed to go up in value. If that was so, why does this person not buy it himself/ herself?
    I do not recommend buying a home as a short-term investment as in "less than 10 years".




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Comments:

2006-11-15, 12:50:39
anonymous from United States  
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i am doing a report on the pros and cons of renting or buying a house,and this has helped me tremendously.thank you so much.
anonymous
2008-05-25, 20:22:11
anonymous from Australia  
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wow thanks heaps for the great info.
im doing a report on this and its great!

x0x
2009-02-03, 07:15:54
anonymous from United States  
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Wow!! simply amazing information!! WOOHPEEE YAYY!! HOORAYYY!! SWEET!! ROCK ON! im doing a project with this and its helped me tremendously! Simply extravagant! This website has made my life soooo much better! its like im living in Disney land now! i feel....i feel....SO GOOD!
2009-02-03, 10:48:23
anonymous from United Kingdom  
Buying a House vs Renting

To begin with you have to decide whether you wish to buy a house, and if you understand all the responsibilities and risks involved.

The following information should help you with your decision, by focusing on the key advantages and disadvantages of buying a house and of renting.

Buying a House

Advantages
• Becoming a home-owner can be seen as an investment. Assuming that over time you pay off your mortgage, you are left with valuable asset.

• The freedom to make any changes to the property that you wish.

• You are not dependant on the landlord when it comes to maintaining the property.

Disadvantages
• The financial costs can be daunting, both in terms of size and complexity. As well as the mortgage repayments there are many other costs to factor in, such as legal fees, estate agent fees and stamp duty.

• You will have to finance any major repairs to the property.

• You are less mobile than if you were renting a property.

• Negative equity - If your house price falls, you may be repaying a loan that is worth more than the value of your property.

Renting a House

Advantages
• The initial costs are much lower. Although a bond is usually required, there are very few other up- front costs such as legal fees. If the property is furnished, this lowers costs further.

• It is far easier to change property. Many rent because it offers them the flexibility of relocating with relative ease.

• The landlord is responsible for maintenance of the property.

Disadvantages
• Due to the possibility of eviction or non-renewal of contract, there will always be a certain sense of insecurity when renting.

• The money you pay in rent is passed to the landlord. Unlike purchasing a house, it is not retained by you as an asset.

• If sharing a property, you may have conflicts with fellow tenants.

• Some landlords may attempt to 'cut corners' when maintaining your house, which may lower the quality of your accommodation.

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2009-04-20, 05:58:19
hr  
thanks,good info
2012-09-24, 17:28:59
anonymous from United States  
COOL

 

 

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