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Renting vs. Buying: The Pros and Cons

By Thomas Mitchell

Perhaps you've found yourself weighing the option of buying or renting your next residence. The answer will be different for each person, depending on your financial situation. There are pros and cons to both, and we're going to look at them.

The Pros of Renting

The most immediate benefit of renting is lower upfront costs. You will probably have to pay first and last month's rent, and maybe a security deposit. If you were to buy you would have to pay a large down payment, cover the home inspection costs, closing fees, and other possible costs as well. When you compare renting and buying, the initial difference can be anywhere from hundreds to tens of thousands of dollars. Also, if you want to "test drive" an area before you buy a home there, renting offers the chance to do so. It gives you the flexibility and freedom to move around without the heavy financial commitment of a mortgage. Also if your job isn't exactly stable or might require you to move, renting will probably be a lot more convenient. If you are anticipating a pay cut that could affect your ability to pay a mortgage as well. Renting is also a good way to establish credit if yours is less than stellar. Just be sure to make your payments on time. Another plus is that you don't have to pay for maintenance, and your landlord might even cover some of your bills occasionally.

The Cons of Renting

The downside of renting is you have no control over how your rent fluctuates. You also might have limits to how much you can modify, customize, or decorate the property, as the landlord has the final say in everything involving the home.. You are not going to build any equity while renting either.

The Pros of Buying a Home

First, you can build equity in your home if you buy it. Rent is wasted money, but mortgage payments slowly increase your ownership in the house. Eventually you can borrow against your equity to get approved for a major purchase like a vehicle or something else. Also you can get tax deductions on a house that you own, like mortgage interest and property taxes. Another plus to owning is you can do whatever you want to your house. Paint the walls, add a room, renovate the kitchen, and no landlord to tell you can't. You are also free to make maintenance choices yourself, and you get the pride of knowing you own your own home.

The Cons of Buying a Home

The cons of buying a home all stem from the significant financial commitment being made. You have to pay for maintenance yourself, and have to pay more money in general through closing costs, insurance, taxes and the like.

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