Renting VS Buying

Determining whether it is more substantial to purchase a home or pay rent is definitely one of the greatest financial decisions to make. Expelling your life savings is a huge and stressful occurrence, which is why it’s very important to understand your long-term objectives and desires with your property before taking that step. The million dollar question that needs to be asked is, “Is it worth putting all of my money into one home or would it be more beneficial to rent for a certain duration of time?” I know that question can be mind boggling and overwhelming, so let me help pave the path of your future as I provide all of the information you’ll need to make that decision.

Renting is the better option if you are looking to become familiar with a certain area and test-drive various living environments. You certainly have more freedom to move around from place to place depending on your satisfaction level for the area that your property is located in. Though that may sound nice and all, if you stay put in the same rental unit for more than 1 to 2 years, you are just wasting your hard-earned money. No equity is built up which is a major downside. Equity is the difference between your owed payment on your mortgage and the current value of your home. When you pay your monthly mortgage fees, part of that payment covers the remaining balance of your home’s loan. As the remaining loan balance decreases, your home equity increases. With that being said, it is a vital asset as it counts toward your overall net worth. Having equity in a property is beneficial if you decide to sell the home and make a profit, but if you are renting, you are not the owner of the property so you cannot accumulate money as easily this way.

Put this into perspective; an average rental property in New Jersey will cost about $2,000 per month. If you lived in that rental for 10 years, at least $240,000 will be thrown out the window as rent tends to increase in price after 1-2 years. However, if you purchased a home of your own, that money would be an investment as you would obtain it after selling your home. Wouldn’t it be better to put that money towards your own home rather than pay off someone else’s mortgage as they profit off of you? If you’re worried about not having enough funds to purchase as opposed to paying rent, you’d be surprised that in many cases, purchasing actually comes out to be cheaper and more cost effective. It is highly recommended to contact a mortgage lender, especially at this time when interest rates are at an all time low!

There are many different loan opportunities, especially for first time home buyers, permitting you to purchase your dream home for only 3% down. Unlike renting which goes up in price over time, mortgages are fixed and remain constant, protecting you from inflation. When tax season comes into play, homeowners are able to take advantage of tax deductions by writing off various expenses such as mortgage interest, home equity loan interest, property taxes, etc. Additionally, no one can kick you out or tell you what to do. You know the home improvements that you’ve always wanted to make? Well now you’d have the chance to renovate your heart out! Landlords are very particular and minimal with what their tenants are allowed to change, so if you are not happy with the look of your kitchen or bathroom, there’s not much you can do about it. Anyway, making drastic changes like that would only be helping the landlord out because those costs would not be coming out of their pocket. When the home is yours, the money you put into renovations will be beneficial in the long run as it would help increase the value of your property.

Despite the fact that there is no right or wrong course of action, it is important to understand the pros and cons of each living situation. Think smarter, not harder!