real estate

How to decide to rent or buy

 

 

Owning a home is the American dream, right? What we're all supposed to aspire to -- with the mortgage, the yard, the grown-up responsibilities, the juicy tax deductions?

Well, hold on. Maybe you're not quite ready for all that. Here's how to decide to rent or buy.

First, understand the pros and cons of both options. Renting can offer more freedom, such as from big maintenance bills. If the toilet suddenly turns into an Old Faithful geyser of you-know-what, that's the landlord's problem -- not yours. Also, you'll likely have more flexibility to move on when the time comes.

But rents can go up, unlike some mortgage payments. And when you do vacate an apartment, you might get your security deposit back, but that's it. You'll have nothing to show for all that rent you paid.

When you own, you build up equity that you can recoup when you sell. You also get tax breaks, including deductions on mortgage interest and real estate taxes.

On the down side, buying a home can tie you to a place. And, a house isn't necessarily the best investment. Historically, the stock market has offered bigger payoffs than real estate.

If you weigh the pluses and minuses and owning a home seems right, next is to ask: Can I afford it? There's the monthly payment, also closing costs and other home buying fees, plus the taxes.

And if a job loss forces you to put your home back on the market quickly, you'll face seller costs, such as a real estate agent's commission.

Insider tip:

Before you can say for sure that you want to buy a home instead of renting, you need to guesstimate how long you plan to live in the house.

Experts say if you think it might be less than four years, you're probably better off renting. Selling a home can take time and money, and those costs probably outweigh the benefits when you own a place for a relatively short time.

Rent or buy? It can depend on where you are in life, and where life might take you.

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