You have two options when financing your residence  rent or buy. The main difference between renting and buying is who gets your check  a landlord or a mortgage lender. Weighing the costs for each is normally a big part of the decision, but there are some other factors to consider.

Perhaps you're tired of apartment living. After all, buying a home seems a natural progression from renting. However, there are times when most homeowners face some sort of life change that causes them to think of renting once again. Following are some of what you need to consider whenever looking for a new place to live.

Financial Short Term

Housing is an expensive part of the budget and weighing the money issues carefully is always a wise choice. RENTING is the more advantageous opportunity in this case. Generally, buying is more expensive in the beginning. One can face thousands in down payment and closing costs. However, there are VA loans and FHA loans that make it possible for folks even with little or no savings to get started on their way to the American Dream of homeownership. Those special loans won't do much about the closing costs however. But, with the current market conditions there are also opportunities for 100% financing and/or down-payment assistance plans.

In the alternative, the renter simply signs a lease and moves in. After that the renter's financial commitment stays simple. Renting eliminates the unexpected  need for a reserve fund to cover repairs and major maintenance of your domicile. As a renter the financial responsibility is finished after signing each monthly rent check.

On the other hand, the homeowner is paying PITI:

•  Principal
•  Interest on the mortgage
•  Taxes
•  Insurance.

Also, the homeowner is responsible for replacing the refrigerator, getting septic lines replaced or drained and possibly patching the roof. This can be a major drain on savings, time and include a lot of aggravation.

But, comparable houses in the same neighborhood can have mortgage payments near or equal to rent. That monthly payment for a homeowner is usually not as painful as it first appears. For example, the homeowner gets to write the mortgage interest off on income taxes  in essence, the costs are defrayed by the government so long as you can handle the monthly cash outlay. So even though the costs of homes are rising, the cost of owning a home after taxes is generally less than renting.

In simple terms though, and as a general rule, renting appears less expensive than owning when you compare only cash flow of PITI vs. monthly rent payments.

Financial Long Term

Here, it is more advantageous to OWN a home. Owning a house is a good investment. With renting you're essentially waving bye-bye to your money each month. As an example, consider:

•  After 10 years of renting there is nothing to show for the expenditure
•  After 10 years of paying on a mortgage there is some reduction in the amount of the mortgage principal  indicating some of your money could be regained via selling the property. Additionally, there could be a substantial increase in the value of the house that could add to your investment return.

Typically, during any 10 year period rental payments will increase far more than mortgage payments and there are no tax advantages.

Credit Considerations

If you have bad credit renting may be your only option. However, with the multitude of flexible mortgage and buyer assistance programs available it is very easy for most people to qualify for a mortgage ... and anybody that can qualify for a mortgage should consider owning property.

Flexibility

If your life is in transition RENTING is probably your best choice economically. It can be much easier to move at the end of a lease than to market and sell a house.

However, homeownership allows the freedom to do just about whatever you want to the house you own. That's not true for renting.

Decision Time

Now that you have some facts, why not complete a questionnaire to find out if Owning is right for you and how much house you may qualify for.

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Last modified: 03/20/10