To Buy or Not to Buy

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.
• Maintenance and repairs are handled by the owner.
• 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.

However, renting has some disadvantages:

• It offers no special tax deductions.
• There are no potential gains from the rising value of property.
• You usually get less space for the money.
• Changes cannot be made or are limited in scope.
• Rent rises with inflation except where there are many rental units available.
• You will probably have restrictions on noise level, pet ownership, or children.

For more information, see Choosing to Rent.

Owning a Home

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).
• Homeowners often have a sense of pride and status in home and community.
• 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 taxes are 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).
• Home ownership can contribute to the general well-being and sense of "roots" of the family, especially for children.
• Homeowners generally are concerned about community affairs and how they may affect their property.

The disadvantages of home ownership may outweigh the advantages for some people because:

• A substantial down payment is needed.
• A house requires a big commitment in time, emotions, and money.
• The house may decrease in value if the neighborhood deteriorates or changes quickly; thus resale may be a problem.
• The homeowner may have limited money for other purchases or activities since his or her money is tied up in the house.
• Maintenance and repairs may be costly and take a great deal of time and effort.
• Owning a house requires money for insurance, and a loss of the house as a result of a natural disaster (tornado, flood, hurricane) could mean a serious financial burden.
• Some families have difficulty budgeting for maintenance, repairs, home improvements, and/or home ownership dues.
• Real property taxes could increase dramatically.
• Total housing costs may take too much of the budget, resulting in potential cash flow problems.
• The family may have higher moving-in costs as new items may have to be purchased for a house.
• The family may feel less secure if neighbors are not near.
• The house may be too large after children leave home.
• Security may be a problem if you travel a lot.
• Unexpected loss of income due to job termination or unemployment may limit money available for home ownership costs.

Define Your Values

Sit down and list the factors about a house that are important to you. If you are married and have children, ask every family member who is old enough to make their own list. Then compare the lists. They won't be the same and you will probably have to talk with each other about the differences and compromise to make a single list for the family. This list should include answers to questions such as the following:

• What is a home to us (a refueling station, the center of family life)?
• Which is more important to us, the house or its furnishings?
• How do the activities we are involved in affect the kind of house we need?
• How far are we willing to commute to work, school, church, shopping?
• How important is privacy to us? Can a privacy fence give enough privacy, or do we want more open space in the country?
• How much time and what skills do we have to devote to maintenance and upkeep?
• What community services are available (garbage and trash pick up)?
• What stage of the life cycle is our family in and are we likely to need more space or less in the next five years? Ten years?