Make a choice between buying and renting housing - this is one of the most important decisions for every American. This decision was influenced by different factors, for example, financial position and way of life. Make your choice is not easy, because at stake is very large sum of money. We try to give you a few tips that will help solve this complex issue.
Lifestyle factors
American labor market is known for strong competition and the ability to change quickly. An employer may face financial difficulties and to resort to job cuts, forcing employees to look for another job. The development of new technologies makes many jobs redundant. People also often tired from long work in one place. In many cases, professional interests are forcing people to move from one city to another.
Owning your own home makes it difficult to quickly adapt to changes in the labor market. Depending on the situation in the real estate market, selling a home can take a long time, whereas a person may need to move promptly in connection with the work necessary. The man rented accommodation has more freedom and can move at any time.
Young people generally prefer to rent a house or apartment for as long as determined with a permanent place of work or will not create a family. Lonely people postpone buying a house before marriage, because the couple may have different views on what should be their home, and where it should be. Older people are also sometimes prefer not to live in their own home, but in special complexes for the elderly, providing various social services.
However, many people are determined to buy her own house. Live at home, change the landscape and the interior of their own taste, feel, independence and security of tenure its own plot of land - this is a great pleasure. It is known that the owners of their homes are usually more involved in society, for example, better contact with the school than people who rent housing (although this is not always the case). Tenants, on the contrary, generally feel the temporary nature of the current situation and not too concerned about where they live.
Financial factor
Buying a home - a good thing, but if you buy a property for the purpose of enrichment, there is no guarantee that such value for money will be successful. Just a couple of years ago in the United States experienced rapid growth in house prices. This encourages people to purchase additional property to be used as a tool for investing. Investing in real estate was considered a safe and promising. But today, the cost of housing in the U.S. plummeted. Buying a property was the same unreliable instrument, as well as other types of investments.
One of the advantages of purchasing a home ownership is to provide state tax incentives. In addition, over time you build equity (paid-increase home value), which someday will be able to use it for other financial transactions. Buying a home when you repay the loan in full, ensures your financial security. Even in the case of worsening economic conditions full-fledged property owners at least have a roof over your head. No one can take away your home (unless war or tyrannical government.)
In contrast, the tenant leased accommodation to constantly give their hard earned money to someone else. He was never able to generate your own home equity. Money spent on rent, never to return to the tenant. Even if a tenant will help the house owner to pay property taxes, he can not deduct these payments from their taxable income. In addition, the rent may increase from year to year, even if the salary is not changed. Finally, a home owner may request at any time of eviction, even if the tenant is not ready.
What are the financial factors should be considered?
If you do not take into account lifestyle, then you can make a simple calculation to determine what is more profitable for you - renting or buying. For the calculation should use the following data:
Amount by which the annual rent increases.
Amount by which the house price will rise (or fall in price) over time.
If the cost of housing is growing rapidly, say, 10 per cent per year (not common), it is much more profitable to buy a home than to pay rent. But during the economic downturn, housing prices are falling, and the benefits of rent increases.
Typically, the U.S. economy is quite stable. If we assume that the increase in rent will be 3% per year (approximately at the level of inflation), and home value will increase by this amount, the tenant will be in a better position than the buyer, for about six years. However, after six years, the financial advantages of buying a house will greatly predominate over the benefits of the lease.
It is obvious that time, the increase in rents and changes in home values - are not the only factors that should be taken into account. Interest rates and repayment period it also plays an important role. But usually to choose between buying and renting is sufficient to consider only these parameters. The current economic situation, when real estate prices are at historically low, specially for those who wish to purchase a house. However, if you are interested in buying property for investment, not just for living, we must consider the possibility of further price declines.
In addition to self-assess the situation, you can also seek advice from an independent financial planner.
Author: Glen MakMehan