For most people, the rent versus buy decision is not just based on finances but also on lifestyle. Perhaps you want to rent a house because you want to have more freedom, or you may want to buy a house because you want to live in a particular neighborhood.
Let’s examine the advantages of both renting and buying. As you can see, many of the reasons for renting focus on flexibility because renting actually involves lower monthly payments and lifestyle flexibility as you can avoid the responsibilities associated with the ownership.
Before making rent or buy decision, it’s a good idea to understand its financial implications. First, compare the costs associated with each alternative. Interestingly, the results that you get often depend on how long you are planning o live in the place. Well, when you buy a house, you may experience a lot of up front fees.
However, the major financial benefits are price appreciation and the tax benefits which occur gradually over time, taking a number of years of price appreciation and tax benefits to offset those initial up front fees. With renting, you don’t have those large up front fees. In fact, you generally just have a security deposit that you will get back when you move out.
However, for many people, buying a house is a good means of forced savings. Because some of your mortgage payment goes toward paying off the loan principal, a mortgage forces you to save in a sense. Although you are buying something rather than saving, but it might appreciate in value over time.
