The Ultimate Dilemma: Should You Buy an Apartment or Rent a House?
The New York Times offers a free online ‘Is It Better to Buy or Rent?’ calculator which will tells you the total cost incurred in buying or renting a place over a span of 30 years. This can give you data that will help you choose the right option for you.
Many people are confused when it comes to buying or renting a house. As this decision can be life-altering, as an individual, it is but natural to be rather unsure. Since each individual’s situation is different, there cannot be one definite answer to such a dilemma. If you want to know what will work for you, consider various scenarios to determine what is applicable for you. For example, if you are still single and do not have a growing family, which needs a permanent house, you can still save money by renting a place.
However, if you want to settle down permanently, in an area that is near to your workplace, or to your kid’s school, it is advisable to invest in a good house. Before making the right decision, you will have to consider the pros and cons of renting vs buying a house. Here is a list of factors that will help you make the right decision.
So, you have rented a house on a six-month or one-year lease. Whether it is repairing the roofing, taking care of the water leakage, replacing the floor, or getting a new paint job, if you are a tenant, you don’t have to worry about the expenses at all. On the other hand, if you buy an apartment, as a homeowner, the responsibility of undertaking any kind of repairs and refurbishment lies solely with you. You will have to bear the expenditure as well as find the right people to complete the job.
In most cases, your renter’s agreement will clearly state that any kind of major repairs will be borne by the homeowner. Hence, renting is a great option if you are aiming at shouldering minimum responsibility.
So you have decided to buy an apartment by applying for a housing loan. Before you begin with the application procedure, spare a moment to go over a few things. Have you considered the amount you may have to pay as down payment, the interest incurred, inspection, processing charges, etc. Needless to say, have you considered the time you will be taking away from your job to complete the lengthy formalities involved in availing and sanctioning of the loan. On the other hand, renting a place will not require you to invest your valuable time and go through scores of paperwork.
The amount for the deposit or the rent can be easily afforded every month through your income. Moreover, after the term of lease is over, you get your deposit amount back when you decide to move out. Unlike home buyers who avail mortgage loans, you do not have to worry about repayment of loan over a period of 20 to 30 years.
As you know, the value of real-estate, in most likelihood, will appreciate over a period of time. For example, assuming you are 25 years old, and you pay an X amount every month as rent, if you pay the same amount in the form of an installment towards your mortgage loans, by the time you reach 50, you will be a proud owner of a real-estate asset. Not to mention, over the years, the value of the property will have appreciated, and you would have carried out a highly profitable real-estate investment.
Just imagine, instead of paying rent for 10 years, you would have build an equity in the form of a house. This would not only make you the owner of the property, but also give you the benefit of increased value.
So, the neighbors in your rented apartment raise a huge hue and cry over the number of guests you entertain, or have issues when your children play in the yard. One can often come across such neighbors or homeowners while renting a place. In a sense, your freedom can be jeopardized when it comes to a rented apartment. Whether it is about adopting a pet, playing loud music, having potted plants, hammering on the walls, exercise equipment in the porch; you may have to compromise in certain situations. Hence, it is always better, especially if you have a family, to get a place of your own rather than rent an apartment.
Owning a house provides the right environment for the development of growing children. It becomes your legal property or asset. Needless to say, the sense of ownership, security, and freedom that a ‘house of our own’ provides is irreplaceable.
If you own a house, there are several tax benefits which you can avail. If you own a home office, you will be entitled for certain deductions. When you itemize your federal income taxes, you can deduct your property tax as well as the amount of mortgage interest from it. This can help you offset the cost of owning and maintaining a house. Also, under certain conditions, if you sell your home, you will not be charged with ‘capital gains’ tax for the profit earned.
You are not subjected to any kind of tax benefits as a tenant, and will not be getting any deductions on your rent amount. Hence, if you own a house, you will definitely be authorized to avail various tax benefits.
Suppose you have a job that requires you to travel or relocate on a frequent basis, then you should reconsider buying a house. In most cases, you will not get to live in the house, or will have to sell it before moving to another location. In case you have to move out quickly, you may not find a suitable customer for your house, and may have to settle for a less than deserving sum of money. Also, given the fluctuations in the real-estate market, one cannot be absolutely sure whether retaining and maintaining the property over a period of time will fetch appreciated prices. Hence, if you have a short-term requirement, you should choose to rent rather than buy a house.
If your job or situation demands that you travel or relocate, rent is the wise option. There is no point in investing your savings in an expensive asset, like a house, when you will not be utilizing it.
… build a good credit history by paying your rent on time.
… invest your savings somewhere else.
… avoid owning a depreciating real-estate investment.
Buy a house if you want to…
… permanently settle in a neighborhood.
… avail a FHA loan with a lesser down payment.
… exercise creative control over the house by renovating or refurbishing it.
Needless to say, one of the vital factors which will impact your decision whether to buy an apartment or rent a house, is budget. Unless you have the money to make a down payment, and a credit score to help you avail a loan at affordable interest rates, you will have to rent an apartment. Also, if you and your spouse earn a steady income, you can buy a house by availing a mortgage loan.