Lease Vs. Mortgage

Buying makes sense only if you plan to stay put.
i Sold Home For Sale Sign on Burst image by Andy Dean from <a href=''></a>

Kissing your landlord goodbye and buying your own place isn't always a step up. While homeownership has its perks, there are other factors to consider. Before you buy, run the numbers and be honest with yourselves about things like monthly costs, job stability and family responsibilities. Renting, at least in the short-term, is sometimes the better option.

Rent vs. Mortgage

When you lease, you pay off your landlord's mortgage; when you own, you pay off your own mortgage. If you live in an area where real estate isn't over-priced and you plan to stick around for at least six years, buying saves you money. Also, stay away from subprime mortgages. These are loans offered at rates greater than the prime to individuals who usually can’t qualify for prime rate loans. The extra interest and fees adds up and undermines the financial benefits of homeownership. It often makes more sense to rent for an extra year or two to get your credit in shape, and then apply for a regular mortgage.

What It Costs

Appliances break down, plumbing backs up, roofs leak. If you rent, the landlord foots the bill. If you own, you do. In fact, you'll probably spend about 1 percent of what you paid for your home each year on maintenance, according to personal finance expert and author, Eric Tyson. Before you buy, make sure that you have both enough cash flow and savings to deal with day-to-day upkeep as well as major emergencies.

Tax Savings

Owning a home is a mixed-bag, tax wise: You'll have to pay property taxes, but you can deduct them along with your mortgage points and interest payments from your income tax. Home improvements aren't tax-deductible, but the interest on a home improvement or home equity loan is. Additionally, Congress sometimes passes other tax credits that you can take for things like installing energy-efficient appliances.

Staying Put

If you buy a place, plan on staying put for awhile. Sure, you're building equity in your home, but that takes awhile and if your area experiences an economic downturn, you won't necessarily be able to sell or turn a profit. Plus, if things get really bad and you lose your job, homeownership means you'll have a harder time relocating to find new work.

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