Should You Buy or Rent a Home?

It’s a classic conundrum: Is it better to buy or rent a home? There’s no one-size-fits-all answer, but here are some reasons to support each option. Renting makes sense if you don’t plan to be in the home long enough to make the closing and other one-time costs worthwhile. It’s also smart if you’re new to a town or region, as it gives you time to get a feel for what neighborhoods you prefer. Renting is ideal for those who don’t want to be responsible for maintenance issues, which can consume a lot of time and, often, money. Pipes can burst in the winter, while roofs occasionally need to be repaired or replaced. If you’re not handy, you may pay a lot just to have a leaky faucet fixed. Buying a home, on the other hand, can allow you to build equity with every mortgage payment — unless, of course, your home’s value falls, in which case you can end up “underwater,” owing more than the home is worth. Over long periods, though, you’re likely to build equity, and if property values in your area rise over time, you can eventually sell your home and reap a tidy profit. (Having considerable home equity can also allow you to consider getting a reverse mortgage in retirement, which can provide much-needed income.) Of course, renters can build wealth by investing in stocks and other things. Homeowners can also benefit from tax breaks, such as the deductibility of mortgage interest paid. That deduction is especially lucrative in the early years of a mortgage, when the bulk of payments are going toward the interest portion of your loan, as opposed to its principal. In addition, you can deduct your property taxes on your return up to a certain point. The property tax deduction used to be unlimited, but for at least the next seven years, it’s capped at $10,000 annually. Finally, owning a home provides stability. Rents can go up each year, but a 30-year fixed-rate mortgage demands the same monthly loan repayment amount for decades.