Mortgage Payments Vs Rent Payments

Mortgage Payments Vs Rent Payments



Mortgage Payments Vs Rent Payments
There is​ an​ age-old debate on​ whether or​ not it​ makes more sense for people to​ rent or​ buy .​
Though it​ is​ hard to​ really understand why there is​ a​ debate at​ all .​
You will definitely hear arguments from both camps that appear logical but if​ you​ do a​ little digging you​ may find that some of​ the​ arguments are thin at​ best.
The simple fact of​ the​ matter is​ you​ are always better off making a​ mortgage payment over a​ rent payment if​ you​ can afford to​ do so .​
It is​ not uncommon for mortgage payments to​ actually be lower than many rent payments are .​
So the​ key is​ to​ understand an​ important,​ fundamental difference between making a​ rent payment and making a​ mortgage payment.
Rent payments are made on​ a​ monthly basis for the​ most part .​
That money gives you​ the​ right to​ live in​ the​ house or​ apartment for the​ specified period of​ time,​ typically one month .​
You receive no other tangible benefits from that rent payment .​
It does not improve your credit score,​ it​ does not produce equity,​ it​ simply gives you​ the​ ability to​ live in​ the​ residence.
A mortgage payment,​ first and foremost,​ also gives you​ the​ ability to​ remain in​ the​ residence,​ however,​ it​ does much more than just that .​
First,​ the​ mortgage payment helps you​ build equity in​ your home .​
Equity is​ the​ difference between what you​ owe on​ the​ property and what the​ property is​ worth .​
That equity can be used for many things including debt consolidation,​ home improvements,​ extra funds,​ etc .​
Equity becomes a​ powerful tool in​ your overall financial plan.
Mortgage payments also include interest payments which can be tax deductible,​ helping your overall bottom line at​ the​ end of​ the​ year .​
Rent is​ not tax deductible in​ most cases .​
Your mortgage payments will also help improve your credit score if​ you​ continue to​ make payments on​ time .​
Mortgage payments are tracked if​ your lender reports the​ loan,​ which most lenders typically do .​
Your overall financial outlook can improve dramatically with an​ increased credit score resulting from on-time mortgage payments.
Some will argue that you​ are tied down to​ a​ home if​ you​ buy it,​ while renting gives you​ more flexibility .​
Though it​ is​ important to​ remember that if​ you​ rent a​ residence you​ are typically obligated for a​ specific period of​ time,​ typically a​ year .​
If you​ own a​ home,​ however,​ you​ are able to​ sell and relocate any time you​ wish,​ or​ you​ can rent the​ residence and relocate any time you​ wish .​
This is​ an​ important and fundamental difference between the​ two .​
It is​ true,​ however,​ that how quickly you​ are able to​ sell your home will depend on​ the​ location,​ its value,​ its condition and the​ market at​ the​ time of​ the​ sale .​
You do have the​ flexibility,​ however,​ to​ sell anytime you​ find a​ willing and able buyer.
One time where renting may seem like a​ more logical choice than buying is​ if​ you​ are going to​ live in​ a​ particular area for only a​ short period of​ time .​
In order to​ determine if​ it​ makes sense to​ rent or​ buy in​ this type of​ situation you​ really need to​ analyze your overall financial plans .​
You need to​ get a​ full understanding of​ any and all costs associated with you​ buying the​ home,​ the​ likelihood you​ would be able to​ sell it​ or​ rent it​ when you​ were relocating from the​ area,​ etc .​
For some,​ even in​ a​ short term situation the​ better financial decision may be buying,​ especially if​ they are able to​ rent it​ and build equity on​ their tenant .​
This may,​ however,​ impede them buying a​ second home,​ though if​ they have adequate credit and income they may not have any problem buying the​ second residence as​ well.
It is​ difficult to​ come up with a​ scenario that makes renting the​ clear cut right decision .​
It seems in​ most situations buying,​ if​ an​ option for you​ is​ the​ better decision financially .​
Though consulting with a​ mortgage professional is​ the​ only real way to​ help determine these things as​ they can give you​ a​ clear understanding of​ what is​ and what is​ not possible for you​ .​
Your financial advisor can also assist you​ in​ making this decision.
Owning your own home has many non-financial benefits as​ well,​ however,​ only you​ can evaluate those .​
You know what is​ and what is​ not important for you​ .​
You know what obligations you​ are comfortable having and which you​ are not .​
The key is​ to​ evaluate your personal situation rather than listen to​ those who are convinced that one or​ the​ other is​ right for you.




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