Is it Better to Rent or Buy?
Feb 27, 2015 06:38PM ● Published by Shelly Tower Rushe
If you’re currently renting, you probably enjoy having someone else care for the upkeep of your property. You’re not painting, repairing plumbing or replacing broken appliances. You can also relocate easily if you’re not happy with your location by not renewing your lease or working out a short-term situation. And you’re not paying property taxes.
But you are probably not able to make the property ‘your own’ by remodeling or painting and, more importantly, you aren’t building equity in the property. Renting is not always the most economical option, either. “The current situation in our area is that rent is quite often equal to or greater than a mortgage payment,” explained Gail Carpenter, CNE, SRES, a Realtor with Northwood Realty Services in Adams Township. “If someone buys, their money is being invested in their own equity and financial future.”
Robert Vernick, senior vice president and chief lending and business development officer at Farmers National Bank, added that there are tax benefits to owning versus renting as well. “If you were to itemize your deduction for income taxes, there is a tax deduction available for the interest expense incurred on a mortgage loan,” he explained.
It’s also possible to increase the value of an owned home. “There are no restrictions on what you may want to do to your home, such as renovations or upgrades,” said Vernick. “The money you put into your house may increase its value when you sell.”
That said, there are some circumstances when renting may be the only option, or make more sense. “Individuals who have the ability to make monthly payments, but whose credit or employment situation prevents them from obtaining a mortgage, would consider renting over buying out of necessity,” said Carpenter.
There’s also the upfront money needed to purchase a home. “Most often, the younger age group is renting due to a lack of funds available for the cash down payment needed to buy a home,” said Vernick.
Carpenter recommends that someone who is relocating to an unfamiliar area rent at first. “That gives those who are relocating time to determine their preferred area, learn the local commute, interview various school districts and learn the local housing market,” she said.
Vernick agreed that renting is a great short-term solution for those not ready to commit to one area. “Renting allows you to move relatively quickly, without going through the process of selling a home, putting it on the market or finding a qualified buyer,” he said.
Once you’ve made the decision to buy, however, how do you proceed? “There’s a lot to learn about home buying and the mortgage process, especially if you’ve never applied for or gone through the process,” said Vernick, who recommends finding a local bank to assist you in determining the different types of mortgage loans and assistance programs for which you may be eligible. “Ask questions and do your research to ensure that you understand all of the fees involved with obtaining a mortgage loan.”
Carpenter recommends getting preapproved for a mortgage before you start looking. “Preapproved renters are in a good negotiating position, which enables them to move quickly to purchase the right house when it becomes available,” she explained.
She also recommends finding the right real estate agent whether renting or buying. “Each market and each person’s situation is unique, so speak with your local Realtor to assess the current pros and cons of your immediate area.”