The Financial Advantages of Buying vs. Renting

iStock_000052978578_Medium_Buy or rentEven though renting costs far less initially for most people, buying a home has much greater life-time financial benefits.

Consider taxes: Renters pay much more in taxes than homeowners. Homeowners can deduct mortgage interest (which is going to be most of your monthly mortgage payment initially), as well as real estate taxes. This means most of your monthly shelter costs are going to be tax deductible. Renters’ monthly housing costs are not tax deductible. The tax gap, although it diminishes a little bit each year, continues for years. And once the mortgage is paid off, the cost of housing for homeowners is much smaller than renting.

Not only do renters pay much more in taxes than homeowners they also need to save more for retirement. Homeowners have an automatic savings plan -– the equity in their homes which increases with each monthly mortgage payment. Monthly rent goes entirely toward shelter costs. Monthly mortgage payments go toward shelter AND retirement and increased net worth.

The longer you stay in a home, the more financial and tax benefits you will realize. If you plan to stay in an area for at least 5 years, home ownership should be your goal. If you cannot commit to staying in any one spot longer than that, then renting is probably a better bet.

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