Rent Vs Buy

In most cases, the amount of money a renter spends can be about the same or less than the amount a homeowner spends on a mortgage. But then you add in the tax benefit for homeowners and the savings can be significant. After all, you build equity AND get to write off your mortgage interest. And if you play your cards right, when you sell you'll be eligible for one of the best tax breaks around.

Right now we have super-low interest rates, super-low home prices and an abundance of homes available for sale.  What more could a potential homebuyer ask for?

Feeding the housing craze right now is the panic over higher interest rates. With the rumor that rates have bottomed out and will be heading higher in the next few months, there is this rush to "get into" a house before rates rise. This is absolutely correct; interest rates are pretty steady right now but they will start to increase over the next few months. Higher interest rates mean a more expensive mortgage. Right now the interest rates are so low that homeowners are paying less than renters for more space and more freedom.

Logically why would anyone want to pay more to rent when you could save money by investing in something you own? Would you throw money away renting a car week-by-week when you could use that same amount of money to buy the car? And that’s an interesting concept because people will save up to buy the most expensive car but they won’t put that same amount of money towards a home investment. You know what they say about cars, “as soon as you leave the showroom floor it loses value.” But your home investment increases in value, especially when you buy low.

Let’s look at a real-world snapshot; although amounts will differ depending upon location;

• A renter will pay $1700 per month for a three-bedroom, 2.5 bath townhome; and that doesn’t include utilities

• A homeowner will pay $985 per month for that same townhome that includes property taxes and  homeowner HOA fees

• During tax season, the homeowner has tax write-offs because of their homeownership

• The renter has no homestead tax deductions

Basically, renters help owners build equity - you are helping the owner pursue their American Dream, while you really get very few benefits out of this deal (a roof over your head). All the money you put towards your rent could go towards your own American Dream.

The simple trick here is buying what you can afford and living comfortably while assuming all the advantages that are available for you.