Renting vs. Buying

Are you thinking about postponing your home purchase because you are waiting for prices to crash or hoping that the interest rates will come down? Is Buying really the better financial option?  Put down that lease application for a minute and I’ll explain.

With home prices on the rise and interest rates reaching 7.5%, you may be thinking about putting your home ownership plans on hold.  However, for that to be a feasible solution, we would have to believe that the housing market was going to crash…and that is just not the case.  Now there may be certain areas throughout the country that are seeing less activity, but if you live in any major area, like here in the DMV, with inventory under 1.5 months, there is no end in sight to the home prices continuing to rise.

So if your alternative is to continue renting instead of buying, remember, just like the prices of homes, the price of rent is also steadily increasing. Every year that you postpone that home purchase, the values of homes have gone up significantly each year, which is equity you didn’t get.

So lets look at the top 3 advantages of owning vs renting:

1. Owning a home gives you stability and locks you into a set payment.  Rents are only going to rise.  And one of the best ways to hedge against inflation is a fixed home mortgage.  The other big thing here, is that even with interest rates as high as they are, you always have the ability to refinance when rates do come back down, but you won’t have the ability to go back in time and buy the house at a lower price.

2. Owning a home allows you to grow your wealth by building equity.  As the values increase, so will your home.  Every year that you wait, you are just losing those gains.  

3. Owning a home allows you tax benefits, by being able to deduct your mortgage interest.  And with the current financial crisis that we are facing, any and all deductions will go a long way.