The common wisdom is that making a monthly rent payment, as opposed to making a monthly mortgage payment, is a bad  idea, and is the equivalent of "throwing money away".

However, that is not necessarily always the case, nor is it completely true in all circumstances.

While there are some advantages to buying and becoming a homeowner as soon as possible, there are also numerous advantages to renting, which ultimately make it smarter to rent than to buy.

The following are just a few among the many advantages of renting:

Get more for your money.

You can usually rent an apartment or house for much less than the monthly cost of buying it.

In renting you initially normally have to come up with only the first and last month's rents.

You don't have to come up with the thousands of dollars in up-front fees or closing costs, such as inspections, legal fees, land transfer taxes, insurance, etc., as do home buyers.

Be freer to move.

You will have no huge long-term financial investment and commitment to consider, so when you need or want to leave, you can do so.

Renting provides an enormous amount of flexibility, enabling you to decide on a year-by-year basis whether to renew your housing situation.

Moving from a house involves enormous planning and costs, such as the thousands of dollars paid in commission to real estate brokers.

There is no waiting to sell, and no agonizing about the housing market at the moment you need to sell.

You can't place a price tag on the freedom and mobility available to you to pick up and leave when the need arises.

The simple binds of renting are much more preferable to the anchor of home ownership.

The pick-up-and-go freedom of renting will always far outweigh the advantages of putting down roots.

Worry less about property values.

If housing values decline, the worst that can happen is that you will pay too much rent, but only until your lease expires.

A house needs to appreciate about 10 - 15 percent to cover the initial purchase costs as well as the selling costs. If you move before that appreciation has occurred, you will end up having to absorb those expenses.

If you move after a couple of years and your home hasn't appreciated significantly, you may not be able to sell your home for a profit that would cover those costs.

On the other hand, in a good renter's market your monthly rent can procure an exceptional apartment, whereas the same money paid toward a high-interest mortgage would tie you down into a long-term commitment with a lesser value home.

If you are lucky enough to have found an apartment that is substantially below market rates, it makes more sense to rent that apartment and invest the savings elsewhere.

Avoid spending.

Home improvements and upgrades, maintenance repairs, gardening/landscaping, property taxes, etc., can become very expensive, whereas as a renter you will only spend money on furnishings.

You wouldn't have to mow the lawn or pay the plumber when the toilet breaks down. All maintenance and repair costs are paid by your Landlord .

Have more money to invest elsewhere.

Down payments and mortgage payments make it difficult for most homeowners to start and maintain savings and investment programs for vacations, retirement, etc.

The rate of return on the investments made with the money saved by not buying can, depending on the type of investment and the market conditions, far outweigh that earned on your house.

Minimum risks in the event of economic woes.

For a homeowner the stakes are enormously high should their finances crumble. When a homeowner can't pay, the lender has great leverage - the house, and all the equity invested in it, not to mention all the hopes and memories.

The following are just a few among the many disadvantages of buying:

No guarantee of a tax break.

Don't assume that you always get a tax break for buying.

If the annual interest payment you pay on your mortgage, and any other deductions you are entitled to, is not greater than your standard tax deductions, you will not reap any tax benefit from owning.

All the tax breaks in the world can't make up for the hopeless feeling of being crushed by debt.

Long-term commitment.

Mortgages are structured so that the first several years of payment are dedicated almost exclusively to interest payment rather than the principal.

The desired effect of buying, namely the opportunity to build equity, doesn't begin until after several years of mortgage payments.

Therefore, unless you are committed to staying in the same location for at least 5 - 7 years, you are better off renting.

Making the rent - vs. - buy decision involves a lot more than simply comparing monthly rent with the monthly mortgage you would pay as a homeowner.

There are pluses and minuses both ways, many of which fall outside the realm of dollars and cents.

The decision of whether to rent or buy is, ultimately, a very personal one that only you can make.

To help you in making this complicated decision, use the Rent or Buy analysis calculator.

                                            
 BACK