The amount of money borrowed on a loan.
Both owning and renting can have their advantages. The better choice for you depends on your circumstances. Here are some of the things to keep in mind when you weigh the benefits of renting against the benefits of owning, both from a financial and a personal perspective.
Renting has both advantages and disadvantages. For example, renting may provide you with more leftover cash each month, if your rent is less than a Glossary Term: mortgage payment. On the other hand, renters are often subjected to rent increases over time. And when it comes to repairs, renters call the landlord to fix the leaky faucet. If you’re the homeowner, you’ll call a plumber–and pay the bill.
Owning a home may provide you with income tax benefits (though it’s important to check with your tax advisor to see how owning would impact your personal situation). Owning a home also offers you the chance to increase your personal wealth as you pay off the Glossary Term: principal on your loan over time and build what is known as equity. Glossary Term: Equity is the difference between the Glossary Term: market value of the home and the outstanding balance of the mortgage loan(s) on the home. Of course, home values can rise or fall over time, so building equity is not guaranteed. And there are significant Glossary Term: upfront costs associated with buying, including Glossary Term: down payment and Glossary Term: closing costs.
Renting usually makes it easier to relocate (to pursue a job opportunity, for example). And if your rent is less than a mortgage payment, renting could allow you to contribute more toward specific savings goals, such as retirement, college, future travel, investments or even putting away money for a down payment for a home in the future.
Owning a home could make sense for you if you want to put your monthly living costs toward something you could eventually pay off and own outright. In addition, it also makes sense if you plan to stay in the area and prefer to feel settled in a home that reflects your personal tastes.
Only you can decide whether owning a home fits your life. If buying isn’t the right move for you now but is something you’d like to prepare for in the future, you’ll find great tips on how to do that in Saving for a down payment.