Should you rent or buy a house? That’s a question often asked by young couples, recent divorcees and people who are undergoing life changes. The main reason that people want to buy rather than rent is because they view renting as throwing money away. In addition, buying a home provides a feeling of stability.
However, there are downsides to buying. Buying a house locks you into a situation. If your life changes, you lose your job, or wish to move, selling a home can be difficult and expensive. Owning a home means that you have upkeep and maintenance costs. If you rent they are borne by the landlord. The cost of rent is often less than the costs associated with home ownership; mortgage payments, real estate taxes, insurance and all the other costs that a home owner faces.
Over the long term, home ownership has been a good investment for many families. But the last decade has clearly shown that the assumption that a home will always go up in value is not true. Just ask the people whose homes are on the market as “short sales.”
If you are an individual who is contemplating whether to rent or buy, keep these issues in mind. If you’re not sure, get the advice of a financial planner who can run the numbers for you and help you make the right decision.