Buying vs Renting

Topic: Monthly Costs

Renting

Advantage

More Fixed Costs for the term of lease.

Disadvantage

Although in the short run costs are more fixed, over several years rent payments can increase.

Buying

Advantage

Over the long term it is possible for the cost to be more fixed if you choose a fixed rate mortgage.  The actual mortgage payment will stay the same for the live of loan. (If you escrow taxes and insurance through you mortgage payment, it is possible for your payment to increase if these items increase.)

Disadvantage

There are more variable costs in the short term.

Topic: Equity

Renting

Advantage

You will not lose equity in a down market.

Disadvantage

No matter what happens with the value of the home, you will never gain equity.

Buying

Advantage

Over time, the mortgage balance decreases and equity builds, even if the value of the home does not increase.

Disadvantage

Equity may go up, down, or stay stagnant.  In the short term, this may cause problems if you need to move.

Topic: Work to maintain or improve the property

Renting

Advantage

There is generally less work in maintaining a home or apartment.

Disadvantage

There is usually limited or no ability to personalize your living quarters.

Buying

Advantage

You have the ability to remodel or decorate the home to match your needs/desires.

Disadvantage

Work needs to be done by you or paid for by you.

Topic: Other monetary considerations

Renting

Advantage

You need a smaller amount of cash up-front to rent.

Disadvantage

There are not tax advantages to renting.  Your landlord gets any and all tax breaks that are available.

Buying

Advantage

There can be tax advantages associated with home ownership.  Consult your tax professional to learn more.

Disadvantage

There is generally a larger initial investment in the down payment when purchasing the home.