Renting Versus Buying

Renting versus buying. There are many differences between buying and renting. If you are planning to move in the next couple of years, renting a home is a good option. However, if your finances are in order...

If you are planning to move in the next couple of years, renting a home is a good option. However, if your finances are in order and you plan to live in the city where you are located for a long period of time, buying a home could be the right choice for you. Our apartment locating expert, Jerry Yelvington is a real estate agent for Avery Windsor Properties, trained and licensed in real estate and in the insurance business, says buying a home has many benefits.

"Obviously, with owning a home you have lot more incentive as far as ownership. You have tax benefits as far as being able to deduct your mortgage interest, and you don't have any of that with an apartment," Yelvington says.

If you are a college student, you will probably live where your school is at for a lengthy period of time. In this case, Yelvington says if the situation is right buying a home, can give you incentives later.

"This has happened in my family. Only if there are multiple members of the family planning to attend the same college. Otherwise, that usually ends up being a mess for the parents. Unless you are going to attend the whole four years at a school, I wouldn't even think about it," Yelvington says.

Say you are paying $800 a month in rent. If you pay that for five years, it's $48,000 out the window. Buy a house and you can deduct the mortgage interest from your taxes while you build up equity, Yelvington says.

If you get a $120,000 mortgage at seven percent, the monthly payment for principal and interest is $798, just about the same as the $800 monthly rent. After five years in the house, you will have accumulated only $7,043 in equity and you will have spent more than that for property taxes and home owner's insurance.

Since almost all of the monthly payments in the first 10 years of a mortgage go for interest instead of principal, some home owners figure they're effectively renting from the bank.

All this is not to say that buying a house is a bad idea. Many people get satisfaction from owning. You can sand the floors, paint and wallpaper, put in granite counters and built-in bookshelves and add an addition to a house you own. Your mortgage payment will remain the same unless you have an adjustable loan or refinance to get cash out of the house. And the home may well increase in value, especially if you stay in it a long time.
But don't be blind to the substantial and continuous expenses of home ownership.

Even if you have blemishes on your credit, you can apply for a no-money-down mortgage from a company like Countrywide, a big national lender. The mortgage, offered through the company's Full Spectrum unit for financially challenged home buyers, combines an 80 percent first mortgage and a 20 percent second mortgage. You still have to pay closing costs. And don't expect to get a rate of seven percent - you'll pay a premium for this loan.

In the end, renting versus buying a home will have to be figured out based on your current financial status and situation. Yelvington says do all the research, and then come up with the best resolution for you.

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