To Buy or To Rent?

To Buy or To Rent?

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Do you know that U.S. renters pay 30 percent of their monthly income on rents while homeowners pay just 15 percent on mortgages? The sheer cost of rent makes buying appealing. Are renters ready to buy yet? The choice between buying a home and renting one is one of the biggest financial decision. This decision is not only made by young people starting out, but it also stumps established professionals relocating for a job to empty nesters who have sold the big family home. About 65 percent of people ages 25 to 34 years old surveyed by in June 2015 said they plan to buy in the next three months. The costs of buying are more varied and complicated than of renting, that makes hard to compare the deal. To help you answer this question, here is the most important costs associated with buying a house as opposed to renting one.


Buying Renting
Initial Expenses Down payment, closing costs, and other fees Renters security deposit, and brokers fee if applicable
Recurring Expenses Mortgage payments, maintenance and renovation costs, property taxes and homeowner’s insurance. In addition to that condo fees or HOA as applicable Monthly rent, renter’s insurance
Net Takings Sale of home – (closing costs, which includes the broker’s commission and other fees + the remaining principal balance on mortgage to the bank + tax on profit that exceeds your capital gains exclusion as applicable) Renters security deposit at the end of lease
Advantage Tax deductible – property taxes, interest of the mortgage payment and, a portion of the common charges if applicable No tax deductibles


Other than the expenses, other factors that should be taken into consideration are:

  • Status of employment – short term or uncertain employment it is better up for renting rather than buying. A steady income every month is the best for buying
  • Limited Funds – Buying needs 15% to 25% of down payment usually. In addition to a steady income, savings are required for buying home.
  • Period of Stay – It is usually said that one can expect to reap financial benefits after 5 years of owning home. Adding up to steady income and savings, it is required to stay put in a place you buy to expect any return on investment.

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