Rent Vs. Buy

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Rent Vs. Buy

Oh the immortal conundrum – is it better to rent or buy your house, apartment, or condo unit? Most experts will probably advice you to buy and research has shown that home owners tend to have a higher net worth than renters. But as with many financial decisions, the answer is: it depends.

Rent Vs. Buy
1. Deposit
2. Rent
Cash out 1. Down payment
2. Bank fees
3. Mortgage amortizations
4. Property tax
5. Home insurance
6. Repairs and maintenance
7. Association dues
None Equity 1. Down payment
2. Portion of amortization that goes to the principal
3. Property price appreciation
1. More flexibility to transfer
2. No headache and cost of repairs and maintenance
3. No interest, insurance, and taxes
4. Monthly rent lower than total cost of ownership
5. Can use savings from just renting for higher-return investments
Advantages 1. Build equity through mortgage pay-down and price appreciation
2. Enjoy psychological satisfaction of home ownership
3. Can potentially increase in market value not just attributable to inflation but real demand
4. Can tap equity as loan collateral
5. Make any changes and improvement on the property
6. Can fix mortgage rate long-term
1. No equity build-up; all cash out is money down the drain
2. Limited freedom to improve property
3. Annual rental rate increases
Disadvantages 1. More expensive than renting
2. Interest rate now is same as average rent increase
3. Responsibility for repairs and upkeep
4. May take a long time to sell if you need to relocate
5. Market values may not grow or just keep up with inflation, which means negative or zero net returns
1. Move around or plan to migrate
2. Find mortgage rates or amortizations too high
3. Don’t have enough money to buy a property or put a down payment
4. Think they can earn more by investing the difference
5. Don’t want the responsibility of repairs and maintenance
Best for those who 1. Want to settle down permanently
2. Want the freedom to do what they want with their home
3. Keep the equity in their house
4. Can afford to make mortgage payments and related expenses for a long time

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