Money Talks, So Should You

Q&A: Is it better to purchase a home or rent?

Danielle Seurkamp
by Danielle Seurkamp, NAPFA (@dseurkampcfp)

Whether to buy or rent a home is a big decision, and there is not a ‘one-size-fits-all’ answer. There are, however, the practical considerations: Do you want to and are you able to maintain a home of your own? Do you plan to move in the near future, or will you settle into one location? If you aren’t sure about where you want to live, renting might be the way to go.

If you buy a home and find yourself wanting to move shortly thereafter, you will have to sell the house which can be a long and expensive transaction.

READ: What should I consider when buying a home?

Realtor commissions are going to eat into your equity upon sale, and in a bad market you could lose money. Then there are the financial considerations: Do you have 20 percent or so for a down payment? Can you afford to buy? Even if your mortgage payment and rent costs are identical, a home comes with the additional costs of real estate taxes, insurance and maintenance.

READ: The challenges of buying a home

On the upside, it also comes with the tax deductibility of mortgage interest and real estate taxes and the ability to build up ownership in the home.

Mortgage interest rates are historically low right now and home values are depressed, but that doesn’t mean that everyone should rush out to buy a house. Consider the factors of your own situation and determine whether renting or buying fits better into your life.

 

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Danielle Seurkamp works as a certified financial planner for Foster & Motley. Seurkamp is a member of the National Association of Personal Finance Advisors (NAPFA), a fee-only professional association and a Dimespring knowledge partner.