Renting vs Buying: Weighing the pros and cons

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My wife and I are both flipping back and forth on this decision. We didn't buy for a long time as I was in the military getting bounced around. I've been out of the military for a while now, and our 2nd daughter was born earlier this year. We've been renting a small 2-bedroom house. It's close to my wife's work and it's all the house we've really needed until now. With the little one getting big enough to need her own room/space, we're discussing whether we should become first time homeowners or just try to find a bigger 3-bedroom house to rent for a few more years and then buy. I've had people tell me that owning your own home is very rewarding. However, nobody has been able to tell me why it's rewarding other than "well, because it's yours". My answer to that is "no, just instead of paying a landlord, I'm paying a bank, but now also liable for maintenance." I've had others say "you can build equity/value with the home" but if we buy a home, we're doing so with the intention of living in that home the rest of our lives so why should I care about resale value? Financially, buying isn't a concern. We have good credit. I'm a 100% disabled veteran so I qualify for the veterans home loan with 0% down and fixed 30 year rate. They also cover PMI. In my area, a 10-15 year old, 1500-1800 sqft, 3 bed, 2 bath house, not in an HOA, will sell for $140-170k. What I don't know is about the market. Is it a good time to buy right now or is it not? Better yet.... just tell me what's the pros and cons of buying vs renting. What is the reward for buying besides equity? What the cons? Convince me that it's a good idea to buy a home.
 
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If I could afford to buy a home I'd buy one in a heartbeat vs renting. Renting is just throwing away money.
 
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You are buying a home either way. You're either buying it for yourself, or for your landlord. Equity is an advantage, but so is the interest you deduct from your taxes. The downside is if the buyers buy more than they can really afford, which the realtors and banks push. You have to have an emergency fund for repairs and plan for future upkeep. You also have property taxes. Buy a house on a 15 year loan. My house is paid off, i'm not moving, so i have no monthly payment.
 
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Zee09

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I've never rented a house or apartment. I have several houses I own and I don't rent any of them out. But as I get older I'm tired of the maintenance, taxes, and I sold a few properties this year and capital gains is another joke. Lets not forget insurance. In the upcoming days I will continue to liquidate property. I'm over living the American "house" dream. Of course nothing negative about America except the IRS.... Property ownership isn't what its all cracked up to be. In the end I will still own a house. But it will be just one. When I get older I'll let that one house fund retirement for me to a small extent. From what you write, I'd keep renting as that sounds like your passion. Leave the headaches to your landlord.
 

CT8

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Originally Posted by eljefino
I'm 42 and paid off my house. It's beyond nice.
there is nothing that gives a better feeling and Congratulations on the great accomplishment.
 

Zee09

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My customers used to ask me to convince them they needed this or that. I never attempted to. If you need convincing, you don't need it.
 
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Up here, houses and properties are way out of the league of first time buyers price wise. I will keep renting till they come down in price, if they do.
 
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In both instances you are paying money to live somewhere. The difference is owning a house is equity. Not only as you pay down the loan but in the house appreciation. You don't get that with renting. Buy something you can afford and location, location, location. The house prices you mentioned are very reasonable compared to other housing markets. Interest rates are still reasonable. The pros are it is your house and you can fix it up as you wish. Most people who buy a house take better care of their properties and are more financially responsible. In a house you can get privacy if you wish. You can also get a garage, pole barn, pool or basement if those are important to you. If you like pets you can have a yard for a dog to run in. The cons are if the market crashes and you would for some reason want to sell at a loss. Maintenance can be a hassle for big ticket items like a roof, furnace, central air etc. But you could buy a house with newer mechanicals already installed.
 
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What is overall financial picture? Do you carry consumer or auto loan debt currently? How much in your emergency funds? Highly recommend you go in home buying debt free with a $1000-$2000 emergency fund beyond the normal downpayment required. Is it possibly to afford a 15 year mortgage?
 
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Patman

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It certainly depends on how housing prices go in any particular area but up here in the Toronto area buying our own home has been very good to me and my wife. The house we just sold cost $529k when my wife bought it in 2011 and we sold it for $930k last summer. The house we are living in now is a brand new build, we put the deposit down for it in March 2016 and the cost was $1.1 million at the time. They finally finished building the house and we moved into it in August 2018, and based on the comps in our neighborhood our house is now already worth $1.6 million, in a market that is still down but starting to slowly recover here. When we sell it in 4 years time and retire we figure it'll sell for somewhere between $1.8 and $2 million. Our mortgage will probably be around $500k at the time so we'll have a nest egg of $1.3 to $1.5 million which we will then use to downsize and move out of the Toronto area. At that time we will probably buy a home for about $500-600k. (we might even buy a plot of land and have our own custom bungalow built) So for us, buying a home has made us a lot of money so far and it's a huge reason why we'll be able to retire early in 2022 (my wife and I will both be only 52 at the time) I do realize that we got very lucky though and there aren't a lot of real estate markets in North America that have been as hot as the Toronto area over the past few years. But if you rent, the only person reaping the benefits of the house going up in value is the landlord. Keep that in mind.
 
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We bought our house about 5 years ago. We were going to rent when we moved here, but I quickly realized that house rents were $500-$800 a month higher than a mortgage payment for the same kind of house. As a previous posted said, buy what you need and don't get sucked into a house that is huge and fancy.
 

NO2

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The big difference with owning vs renting is that your mortgage payments will eventually end. The downside is that transaction costs to buy/sell a house are relatively high. . It also depends on your profession - do you plan on moving soon or are you or your spouse in a profession which allows you to be geographically stable? Some factors to consider: Staying > 5 yrs Good schools, or good private schools (buy a cheaper house) Sidewalks (for kids bike riding), or a rural road with light traffic Exercise/recreational facilities - sidewalks, parks, pool, woods, etc. Proximity to family Tolerance for house maintenance Availability of emergency funds - house will need new roof, appliances, furnace-A/C etc. at inopportune times Internet, cell service and utility availability. Rural areas should have clean well water. Smell (e.g. don't buy near a pig farm) Topography of area - stay away from floodplains, local depressions and fire prone areas Cost of insurance (car, home, flood) Medical services (much more important when you are older)
 
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Originally Posted by dogememe
If I could afford to buy a home I'd buy one in a heartbeat vs renting. Renting is just throwing away money.
Yep.
 
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Sit down and run the numbers. It's not just the monthly payment. You need to have sufficient funds for the down payment otherwise the PMI kicks in. Your taxes will figure in as they are included in the monthly payment for most. Maintenance is another item. Stuff happens. On a older home its Major. Roof, painting, plumbing etc. Insurance is another factor. There is a lot of good in owning a house but also understand what it entails.
 
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Having owned a total of 4 primary residences over the past 18 years, I will say that "joy" is not one of the words I have uttered in the same sentence as "owning a home". The biggest benefit, or should I say, piece of mind, with owning is you can't have anyone kick you out when the lease ends because the owner wants to sell the house. This could be disruptive in a number of ways, especially with children who may be forced to switch schools, cost/stress of forced moving, etc. If you anticipate moving before the home can appreciate in value, say to move to a better school district, renting may be the better option, but remember kids tend to damage carpet, walls, etc., which you will be liable for when moving out. The biggest questions you should ask are financial related. Remember that when you sell, you will need to sell at a price that is at least 10% higher than your purchase price, not accounting for inflation, in order to cover the transaction costs. Using sites like Redfin and Zillow should give you an idea of how quickly homes sell and how much they appreciate over time. If you are forced to move before selling your home, the cost of carrying the mortgage, property tax, insurance will quickly eat into your appreciation. I do think that 2019 will be a good time for first time buyers. There are some macro-economic forces at play that will likely cool the market and interest rates will likely stabilize based on recent comments from the Fed (my prediction). Lastly, seeing as you are in the South, make sure to get a North or South facing house if you want to enjoy your backyard during the summer!
 
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Originally Posted by spasm3
Equity is an advantage, but so is the interest you deduct from your taxes.
This used to be true. For most people in the US, the mortgage interest deduction on a primary residence is now worth exactly nothing. It's an itemizable deduction, which means unless you have high itemizable deductions, i.e. a mortgage over about 250K or fairly large medical expenses etc., you use the standard deduction and get nothing for your mortgage interest.
 
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Paying monthly on something you will eventually own out-right, far-outweighs renting or leasing. This includes vehicles, which depreciate rapidly sometimes. for instance: I've been driving my 2004 Chevy Colorado for nine years now, after the initial five year loan. I've paid off my 30 year mortgage on my home in 23 years. Last payment was 14 years ago. Owning both my home and vehicles out-right, means no monthly payments. The OP of this thread cannot get to my stage renting. He cannot enjoy the past nine years of not making a house or vehicle payment. So where is the tough decision here?..... frankly there is no tough decision. It's a very easy decision to own instead. In the past nine years, I've saved enough to pay cash for my new driveway, roof, air conditioning and furnace, the four most expensive projects of owning a home. Owning is a no-brainer, even for a woman that doesn't own a tool to fix her home or vehicles. Significantly investment-wise to own, rather than rent/lease.
 
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My opinion, do not purchase a house as an investment. Purchase a house as a place to live with maybe a hope that it will increase in value over the long run. (remember 2007-2008, some people are still under water) If you are going to move in less than 5 years IMO rent, the real estate commission will probably wipe out any increase in value in the first 5 years. Interest may no longer be an advantage with the new tax laws and the doubling of the exemptions, one should look at that as it may not be an advantage. Then you have the other home stuff, HO ins (in lieu of renters) purchasing the one time maintenance items, mowers, tools, hoses, and then the time to do all the maintenance. So much depends on where you live, (do you need earthquake and flood ins) rate of housing inflation, (the boom seems to be over for now) job stability. A huge undertaking. Ours is paid for but maintenance is a huge issue every year as is upgrading as it ages, basically, the costs never end. All homes are money pits but one has to live somewhere. Not as bad as vehicles that lose value the minute you drive them off the lot.
 
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