We all need a place to live, but at some time in our lives many of us face the question of whether it makes more sense to rent or to buy. In fact, if the situation is right, there can be many good reasons why buying makes sense, and why renting can leave you at a disadvantage.
No Wealth Building
If you own a home over the long haul it's almost certain that you will build up equity in the property. In fact, it can be one of the best ways to give yourself a solid financial cushion in life. When you rent, none of your payments go towards building up savings, and you cannot benefit from any improvements in the housing market that add to the value of the property.
No Tax Breaks
Our tax system is skewed towards home ownership, and renters cannot take advantage of many breaks that come the way of owners. These range from first-time buyers tax credits to deductions for your mortgage interest and property taxes.
Unpredictable Cost of Living
When you buy with a fixed rate mortgage, you have a great deal of predictability over your monthly costs. Property taxes may increase your payment over time, but basically you have a good understanding of what you'll be paying for the life of the mortgage. When you're renting, you don't have much predictability beyond the end of your lease.
Unless you have a very understanding landlord, there are likely to be limits on how much you can personalise your home. Of course you'll be living with your own furniture and possessions, but you probably won't be able to repaint without written permission, or do any renovations to make the home more your own. Any money you do spend on improving the home effectively just makes your landlord's investment worth more, and doesn't benefit you.
Rules and Restrictions
When you rent, you may not be able to own a pet. You may not be able to smoke. You may not be able to have friends or family to stay for a long period of time. You don't make the rules -- your landlord does.
Although you may have signed a year-long lease, you don't have any control over what happens at the end of that period. Maybe your landlord will want to renew, or maybe he won't. Additionally, if your landlord has fallen on hard time, or has been financially imprudent you could face the consequences of foreclosure, even though you yourself have paid your rent conscientiously every month.
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