Renting Vs Buyng A Home Essay Research

Renting Vs Buyng A Home Essay, Research Paper

INTRODUCTION

BACKGROUND

Should I sign another lease or take the plunge and buy a place I can really call home. This is a question that millions of Americans ask themselves everyday. This question is also an important one for me, as I am currently trying to make this decision. To answer this question consumers need to consider a few factors. A couple of these factors that need to be considered are their lifestyles and financial situations. According to the 1990 United States Census, there are approximately three million people in the state of Texas that live in owner-occupied housing and slightly over two million that live in renter-occupied housing. There are numerous reasons that people may choose to rent over actually buying a home. Making a choice between renting and buying is made easier in this day and age, due to the amount of information that is available on the World Wide Web. I have done a great amount of research through the use of the Internet while working on this report. There is an unbelievable amount of information on purchasing a home. The following is some information that is available to help with the home buying decision: Step-by-step instructions on the home buying process, mortgage calculator (helps to compare cost of buying vs. renting), on-line loan applications, on-line mortgage companies, on-line Fannie-Mae forms, on-line real estate companies. Through the use of the Internet the home buying choice and the actual home buying process is made much easier. A consumer can actually apply for a home loan, obtain pre-approval, and buy a house on the Internet. In addition to the amount of research gathered on the Internet, two interviews were conducted. The first interview was conducted with a real-estate agent. This real estate agent was able to provide some helpful information from a different perspective. The second interview was with a personal friend who has been on both sides of the avenues, renting and buying.

PROBLEM

Buying versus renting a home is a big decision that consumers must make at some point in their lives. Millions of Americans are faced with this decision everyday. There are advantages and disadvantages to renting and buying a home. Before making this decision consumers must first look at their individual situation, they then must examine their short-term goals, and then finally their long term goals. This report will hopefully help in making this decision easier.

PURPOSE OF REPORT

The purpose of this report is to discuss the advantages and disadvantages that consumers have renting versus buying a home. This information will make it easier for consumers to make this all-important decision.

DISCUSSION

THE PROS AND CONS OF RENTING VS BUYING A HOME

“Buying a house is often the single largest investment that many individuals make, but the decision to buy a house requires balancing investment issues with emotional/personal ones” (”Buying versus Renting: Investment Decisions”, 1). Renting is usually better than buying in the short term (0-5 years). Buying a house can make economic sense compared to renting over the long-term.

If you are considering buying a home, one of the first decisions you need to make is whether buying a house instead of renting one is the right direction for you. One of the first steps is to consider the cost of buying versus renting. “A general rule of thumb is that if you expect to stay in a new house for seven years, you’ll be better off buying” (Rowland, 1). The next questions to ask yourself is what can you afford to pay for your first home, and how much of a down payment can you pay. The best way to figure out much house you can afford is to use the calculators available on the Internet.

After answering the above questions, potential homebuyers should then look at the pros and cons of renting vs. buying a home. The following is a list of some of the advantages and disadvantages to renting vs. buying a home.

Advantages of renting a home

Renting a home provides more flexibility than owning a home. When the lease is up, you have the freedom to move. Someone who is renting does not have the risk of losing equity (”Renting or Buying: Advantages and Disadvantages”, 1). There is generally less work and less cost for the renter in maintaining a home or an apartment. The landlord, or owner of the property generally pays for this cost. The renter has fewer amounts of “up-front” cash that they must provide before moving in.

Disadvantages of renting a home

Renting a home does not provide tax advantages to the renter. Any and all tax advantages go to the landlord or property owner. Renting a home limits the renter the ability to personalize his or her home or apartment. No matter what happens with the value of the home, the renter will never gain equity. The landlord will gain any and all equity.

Advantages of buying a home

There are tax advantages that can be attached to home ownership (”Renting or Buying: Advantages and Disadvantages”, 1). Mortgage interests and property taxes are tax deductible. Your ability to remodel and redecorate the home to match your needs and desires. “Over time, the mortgage balance decreases and equity builds, even if the value of the home does not increase” (”Renting or Buying: Advantages and Disa

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