Own Vs Rent
Owning Vs. Renting
Myths and Realities
1. One of the biggest misconceptions about homeownership in the country is that owning a house is a huge tax break. If your mortgage interest and other qualifying expenses aren’t more than the standard deduction – there is no tax advantage to owning. Even if you are able to deduct your mortgage interest and property taxes, remember that depending on your tax bracket, you are still only saving NO MORE than 10 – 35 cents in taxes for every dollar you pay in mortgage interest. Once you factor in your maintenance and repair expenses, your tax savings could quickly disappear.
2. A Wall Street Journal-commissioned study concluded that “almost every house, no matter how recently or expertly built, is a money pit. On average you should expect to spend 3-4% of your house’s value annually on maintenance. And that doesn’t include taxes, insurance, improvements, landscaping, etc.
3. A Wall Street Journal-commissioned study concluded that “almost every house, no matter how recently or expertly built, is a money pit. On average you should expect to spend 3-4% of your house’s value annually on maintenance. And that doesn’t include taxes, insurance, improvements, landscaping, etc.
One new homeowner/columnist wrote “taking care of your humble abode can be so time-consuming that the American dream can turn into a nightmare. I’ve been a homeowner for only six months and already I’ve spent thousands of dollars beyond my closing costs and down payment… but most of the expenses, I won’t ever recoup.”
4. Only your mortgage payment will remain constant. Other costs can go up every year, such as taxes and insurance both of which have been rising in recent years. And if you have an adjustable rate mortgage, your monthly payment can rise too.
5. There are very few risk-free investments and a house is certainly not one of them. House prices are not a one-way escalator going up. They can also go down, predicting whether a specific house in a specific market will appreciate is very difficult. As one financial adviser noted “any single (house) sale is as much a lottery as trading stock is.” In short, this investment (home ownership) is not a slam dunk. For decent returns on any home, you need either stupendous luck or a holding period long enough to amortize your many costs.
6. Low interest rates may actually serve to make buying more expensive. It sounds counter-intuitive, but low interest rates can actually make housing more expensive.
RENTING OPENS DOORS… Renting allows you to use your “down payment money” for other investments, to start a small business, to travel, or even to change careers. Not to mention to meet new people and have a new life.