Buying a Home is the American Dream. It is more than a place you put your hat at the end of the day. It defines you, protects you, and prospers with you. Yes, Home Ownership is a noble pursuit, but it always starts with this first, important question: Should I buy or Rent my Home? The answer, surprisingly, is not so obvious.

Now the question of affordability is an important one, but thats not the subject of this article. We have a free calculator at our website. Youre welcome to use it. The subject of this article, however, deals with the questions that must be answered, before a renter can migrate into the magical realms of HOME OWNERSHIP.

Here are 5 MAGIC POINTS that you need to examine, on whether or not to BUY or RENT your next Home:

1. EXPENSES

2. COMMITMENT

3. MONTHLY PAYMENTS

4. TAX RETURNS

5. WEALTH

1. EXPENSES:

Renting a home requires that you give a check to the landlord each month. Thats it. Youre done. Everything else is simply taken care of for you. When you OWN a home, you are in business for yourself, and this means that you must handle all of the expenses yourself.

1. You are responsible, of course, for the monthly mortgage payment to the bank...

2. You must pay all your utilities, including phone, gas, electric, cable, trash, water, etc.

3. Dont forget your responsibility to take care of maintenance. Not having enough money in the bank account is not a good enough excuse. If its broken, ya gotta fix it!

4. Dont forget your Homeowners Association Dues, your Membership Fees, Property Taxes, Special Assessment taxes, insuranceyada, yada, yada.

When you rent a home, you give the landlord a check. When you buy a home, you must ensure that all expenses are met and managed every single month, forever...

2. COMMITMENT:

Renting and Buying have different financial commitments.

1. To rent a home usually requires a lease. Sometimes its month to month; sometimes its a 12 month lease. But, no matter what, theres always a way out. Your commitment is limited to the time you choose to stay and reside there.

2. When you buy a home, you usually sign a 30 year mortgage, which most people would argue, is like forever. You are committed to ensuring that the payment is delivered to the bank or lender every single month, on time. They dont care if you want to move at some point. You can sell your home of course, but you cant just break your mortgage, like you can break your lease.

Buying a home requires a long-term, financial commitment. Renting a Home simply requires that you cut a check each month you reside at the home of choice.

3. MONTHLY PAYMENTS:

It always appears that a renter will pay less each month on monthly payments. Let me shed some light on this subject. Examined closely, this is as far from the truth as the moon to the Earth. Lets use an example:

1. As a renter, you pay $800 a month, lets say, that increases 5% each year. The math may differ with you and your landlord, but you get the idea. Barring rent-control, this is inevitable. Simple enough.

2. As a Homeowner on a fixed rate loan at $1000 Principal and Interest per month, the payment never changesNeverNot ever

3. In other words, the renters monthly rent will eventually SURPASS the homeowners mortgage paymentMuch faster then you might expect.

In this example, our Renters Monthly Payments will exceed our Homeowners Mortgage Payment, in about 6 years.

4. TAX RETURNS:

A renter usually does receive a tax benefit from the State and Federal tax boards each year, sometimes referred to as a renters credit. But the Homeowner receives a deduction on the Interest paid on their loan. This is a huge benefit to the homeowner.

1. Lets use the same example with our $800 renter. At the end of the year, our renter might receive a $600 renters credit on their 1040EZ form when doing their taxes. Simple enough.

2. Our Homeowner, on the other hand, paid a total of $12,000 in mortgage payments, of which about $11,500 went towards INTEREST. This INTEREST is a write-off.

3. Lets see$600 versus $11,500. Hmmm. I like that math. That equates to a nice healthy tax return for most of us, come April of next year.

Take those thousands of dollars in tax return, and go on a nice Cruise around Jamaica!

5. WEALTH:

Its arguably much, much harder for a renter to build wealth. There is no built-in mechanism for appreciation, whereas the homeowner has postured themselves wisely for the future.

1. Lets say we have a renter that wants to get wealthy. Great! They must go find a business to run, or a stock to invest in, or come up with a great invention, or be the next rock star, or follow a family friends tip, and go do Cattle Futures from August to September (just an example, folksI dont know anything about cattle). In any event, most people would be concerned that our renter is following the proverbial pipe dream towards wealth.

2. But lets say we have a homeowner who wants to build wealth. Great! What do they need to do? Simple.NothingPay the mortgageLive in the houseGo work your job. Thats it. Real Estate appreciates in value, on average, over the long haul, like no other financial vehicle. It is a virtual certainty, and it is automatic. The homeowner controls the total value of the home. Thats the magic of leverage.

3. Let me drive the point home: Someone might buy a house at $150,000, lets say, and over the course of 7 to 10 years, it is completely reasonable to suggest that this very same house could be worth around $600,000.

Renters do not have a built in advantage for building wealth, whereas Real Estate appreciates in value as a virtual certainty. They dont call home-ownership the American Dream for nothing!

SUMMARY:

The subject of deciding on whether to Buy or Rent, is not simple. In the end, it boils down to a question of complexity. Being a Renter is simple. Being a Homeowner is more complex, and yet, that does not mean that it is not within your grasp. It IS!!! There are so many people that are just waiting in the wings, yearning to help you get there. Real Estate Agents, Mortgage Brokers, Friends, Family, etc.

With all of these resources around you, just about anyone can own a home, and in this great country, the American Dream of Home Ownership is completely within all of our grasps!

But do me a favor. Give yourself the time to examine these important questions first. Look within. As we all get older in life, we yearn for more. Buying versus Renting is a common theme in this journey. As we wave goodbye to the younger years, we say so long to the simplicity of life, and we say hello to the promise of prosperity, wealth, and a better tomorrow. We also say hello to higher, more complex things. Often times, its simply the willingness to accept complexity that will get you to the understanding you need.

Best of luck on your journey, from Renting to Owning your next Home!

Weve enjoyed providing this information to you, and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust, and never turn your back on your own common sense.