Assisting Transitioning Military and the
Family Members Who Support Them
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FINANCING A HOME - SHOULD YOU BUY OR RENT?
Should you rent or buy a place to live? What kind of home does your family need? How much space is needed for your family and their activities? How much money do you have to pay for housing? When is the best time to buy a house?
Buying a house is more complicated than just having the money for the down payment and monthly mortgage payments. Owning a house requires a tremendous commitment of funds, time, and attention. For some people, owning is not the best or only way to have a comfortable and safe living environment. Consider the pros and cons of renting listed below.
Renting a Home
For some families, renting is the best solution. You may not be ready economically or emotionally to own. Some people consider renting a temporary way to live until they are more settled in job or family. Renting can mean benefits such as:
- Moving is easy (you can move within a short time).
- Amenities may be available (pool, tennis courts, social/activity rooms, laundry facilities, security for apartment renters).
- You have few responsibilities.
- The owner handles maintenance and repairs.
- There is no large down payment, only a security deposit.
- Some monthly expenditures (rent) are fixed, making it easier to budget.
- There is no chance for financial loss of investment (beyond the amount of the lease).
- There is a sense of security from nearby neighbors.
- You can look over the community and move again.
- Moving-in costs are low.
- It is easier if you travel a lot, either for your job or pleasure.
- It offers no special tax deductions.
- There are no potential gains from the rising value of property.
- You may get less space for the money.
- Changes cannot be made or are limited in scope.
- Typically, rent rises with inflation except where there are many rental units available, or there are caps on rental fees.
- You may have restrictions on noise level, pet ownership, or children.
If you are thinking about buying a house, consider the following advantages:
- A house is a form of forced savings (you make payments on an asset that may grow in value-many families would never accumulate assets otherwise).
- A homeowner may have a better credit rating (equity in a home improves the credit status of the family and can be used as collateral for an emergency loan).
- Mortgage payments contribute to an investment, particularly if the property is located where it increases in value over a period of years.
- Monthly payments remain relatively constant for many years (fixed loan); thus housing costs are stabilized because present and future costs can be estimated and planned.
- Interest on mortgage monies and property taxes may be legitimate income tax deductions.
- The house may increase in value, resulting in a significant gain in net worth.
- Ownership may contribute to security, especially in retirement years when income normally decreases.
- A homeowner can borrow against his/her equity, as the value of the house increases against what is owed on it.
- More space may be available for family members and their activities.
- A homeowner has freedom to make improvements and changes to the house and surroundings as desired (although a development or association may have restrictions and prohibitions).
The Neighborhood
- Location
- Appearance
- Whether area is appreciating or depreciating in value
- Safety and security
- Convenience to work, shopping areas, schools, and church
- Good roads and streets
- Available public transportation
- Police and fire stations
- Health and sanitation services
- Schools and churches
- Recreational facilities, such as parks
- Appearance
- Size versus amenities
- Special features your family needs
- Within your price range
- Total mortgage financing costs (both interest rate and terms of mortgage)
- Tax benefits
- Energy costs
- Space, arrangement, and condition
- Bedrooms and bathrooms (enough space and privacy)
- Kitchen and work area (well-planned and step-saving, adequate work and storage areas)
- Dining and living areas (adequate for family entertaining and resting)
- Storage (adequate and well-placed in each area of the house)
- Room sizes, shapes, and wall areas that permit use of furnishings and equipment on-hand or planned.
- Interior and exterior finishes (types acceptable, condition good, easy maintenance)
- Heating and lighting (adequate and efficient systems)
- Outdoor space (patio, deck, lawn, garden space, outdoor storage)