Owning your very own home is everyone’s dream. It starts off however with the question that everyone poses to themselves: should I buy one or rent it out? The answer however is never obvious. Affordability always is one of the defining factors. Here are five questions that you must ponder over before making that all important decision.
1. EXPENSES – if you rent out a house, then your expenses are limited merely to that cheque you hand over to your landlord monthly. If you do own your own place, then all the expenses must be borne by you. These include: mortgage payments, utilities, maintenance bills and a whole heap of taxes.
2. COMMITTMENT – financial commitments differ between renting and buying a house.
a. Renting calls for a lease for the time allotted at the house.
b. If you buy a house, you sign up for a 30-year mortgage. You would need to ensure that the payments are timely and are made every month to the bank or lender.
3. MONTHLY PAYMENTS – at face value, it seems that if you rent out a place, the monthly payments are not such a burden. However, this is not true. When you rent a house, the monthly rate increases a certain percentage annually. However, if you buy your own home, the loan rate stays fixed. In a nutshell, at the end of the payment period, renting a house could prove to be far more expensive that buying your own place.
4. TAX RETURNS – state and federal tax boards to mete out tax benefits to renters – this is called ‘renter’s credit’. However, homeowners are given deductions on the interest paid towards their loan.
5. WEALTH – if you consistently keep renting houses, this will eat into your savings, and building up on wealth will be a constant battle. However, once you have own home, you can rest easy, as real estate appreciates in value, and at the end of the day, it belongs to you!