Should You Buy Or Rent Your Home In Today's Economy?

Many of us today are faced with the challenge on whether to buy or rent a home. And in these trying times, it seemed tough to answer. In addition, family and friends who have limited professional knowledge swamp us with advice that are often unreliable. Remember that it is not appropriate to "ask a BUTCHER how to BAKE a loaf of bread". While it is good to listen to them, it would still be best to keep in mind that concerns of this IMPORTANCE require an expert's opinion. Professionals can give us surefire answers to base our judgment from.

Whoever you take advice from should consider your individual situation, have experience, and be able to prove his/her point with solid evidence. In the case of should I rent or should I buy, Russell Gray (co-author of the book Equity Happens) would say "Do the math!"  In other words, everyone's situation is unique and often times math is the solution to get an objective opinion (in this case, numbers) about what choice to make in the rent vs. own debate, at least from a financial standpoint.

With that being said, I'm not going to try and tell you which option to choose. I cannot possibly do that because I don't know your particular situation. I will tell you some numbers to think about and I will say that for many people, right now is an amazing time to purchase a home. You can start with monthly expenses. In the case of renting, add up your rent plus any additional fees and the utilities you must pay.  

On the side of ownership, more items are combined together that would require a professional's assistance. Included in the ownership costs (otherwise known as PITI) are the following: "principal" which pertains to the amount you must prepare toward your loan's principal, "interest" or the amount paid towards your loan's interest, "taxes" or the amount you must pay for property taxes, and "insurance" which pertains to both property and mortgage insurance. This makes the process a bit more daunting.

In addition to the PITI costs, you will still have utility expenses plus maintenance costs like lawn-care, occasional new shingles, appliance, etc.  After you add everything up you will then be able to see what the monthly monetary difference is between owning and renting.  Or, if you are currently renting and you can pay no more than what you are currently paying per month, you can work backwards on the ownership costs and determine what price of home you could buy.  It's important to not just look at the monthly payments, however, and also look at the long-term financial advantages.

In this case, ownership seems to be where the long-range financial rewards are. Renting a house does not guarantee a title even after years of investment. You will also notice that your rent increases as time goes by. On the other hand, the payment or main cost allotted to buying a house practically stays the same even through the years except for some such as utilities, insurance, etc. The good news is that there is a promise of equity from all the payments you have made towards the ownership of your house. In an appreciating market like ours - a wise choice can go a long way in as far as the value of appreciating our home is concerned!

There is a good chance your choice shifts according to your personal feelings and opinion. Simply put, making the best decision towards renting or owning a home involves your subjective feeling. What can be more fun than having a house you can call your own, and enjoying the independence in creating changes with it however you like it! On one hand, you might favor the side of renting if you will give emphasis on other concerns such as having no lawn to mow, or other maintenance issues.

Often, financial consideration plays a big role but also brings into mind subjective feelings over the argument: to buy or to rent a house? To be more specific, purchasing expensive appliances no longer bothers you when you have huge savings from renting instead of owning. Or maybe, the freedom to do whatever you want with your own house appears inconsequential if you will note the massive expenses you shed off just to purchase your home. Either way, the dictum "numbers do not lie" proves that the former is still weightier than the other.

Conversely, this piece wants to point out two important concerns relative to renting and buying a house. One is to seek advice from the right authority to help you identify the best course of action. Next is to examine carefully both the financial and subjective considerations. The gains or benefits usually become apparent on a long term basis. Finally, it would help to bear in mind that we are in a buyer's market where ownership is deemed favorable over renting.

Author: Alexandria P. Anderson specializes helping people to find and purchase homes on Lake Minnetonka, as well as Lake Minnetonka property for her realty clients.