Renting Versus Owning Costs

Renting Versus Owning CostsNov 27, 2012: The big debate these days is whether home ownership is still everything it's cracked up to be. Yes, we still get a tax deduction on the amount of interest we pay, but the building of equity is no longer a given with a home mortgage.

There are many areas around the United States with falling home prices, causing some people to be upside-down on their loans and leaving them unable to sell. On top of that, when we buy a home, we are responsible for the maintenance of our property, both interior and exterior. Many people think that once they buy a home, they will automatically build wealth, however, there are times when renting is better. Anytime we take out a loan, we also have to factor in the costs of carrying that debt even before we start to dream about fat returns in the future. This applies to any type of loan whether it is a home mortgage loan, a business loan, or even payday loans.

Costs of Carrying Home Mortgage Debt

The home ownership example is a good way to figure out the types of costs that can creep into finances that impact our lifestyle immediately. Everyone has heard of the adjustable rate home mortgage loans with creeping interest rates. This is one way that carrying a loan for a long period of time can cost us more every year. So, the terms of the loan are very important to understand before we sign.

Another way that homeownership costs can sneak up behind us is in the "invisible costs" that we have to pay to maintain our investment. We will either have to spend extra time caring for the property or pay someone else to do the lawn care and outside maintenance. This can include gutters, the roof, and even crawl space maintenance. Inside, any leak or appliance breakdown can spell financial trouble, if we don't add in several hundred dollars of extra monies for home repairs on top of the monthly mortgage to our budget. The same is not true if we rent and do not carry home mortgage debt.

Assess Our Situation

Assess Our SituationFor some people, it just makes more sense to rent. Renting is good if we don’t plan on being in the area long enough for prices to appreciate to cover our closing and maintenance costs. Or, if real estate prices are depressed in our area and are continuing to fall. Buying too high will only cause distress for a homeowner. Elderly and single parents often choose rentals and town homes because of the lack of maintenance and some property oversight by someone who has more time or mobility.

In this day and age, we feel that owning is not always the answer. It definitely makes sense to take a detailed look at the real costs of ownership, in both time and money, before we sign on the dotted line. We look forward towards your views on renting versus owning.

Image Source(s): iStockPhoto

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