Renting vs Buying

Income tax benefits

Mortgage Interest is deductible on your taxes as long as your mortgage is less than one million dollars.  Especially in the early years of a mortgage the majority of the payments made are interest.  Property taxes are also tax deductible.

Equity buildup

When you pay rent your payment goes to the seller and probably to make his mortgage payment.  The seller is the one who benefits from the tax credits and equity buildup. 

Home have a tendency to go up in value, this depends on the location and market conditions but long term is pretty normal for home to increase in value.   When you sell your home the difference between what your current mortgage balance and what you sold it for minus your closing costs is money you put in your pocket.  This money is tax free as long as you used the home as your primary residence for two of the last five years.

Income tends to increase over time. As long as you have a fixed rate mortgage and do not take out any new mortgages your payment will stay the same until the home is paid off.  Your property taxes and insurance may go up increasing your payment a little. This means the payment you get today will get easier and easier to make as time goes by.

Trade-up value

The equity buildup is what gives people the ability to move up to bigger better homes.  Most people take the money they get from a sale of a home and put it into their next home as down payment.  This allows them to benefit from the equity buildup to get a better home.

For example, Lets say you purchased a home 10 years ago for $100,000 and had a payment of $700 per month.  Let also say that today home is worth $200,000 and a typical mortgage would be closer to $1300 per month.  With your increased income the $1300 is just as easy to make as the $700 was 10 years ago.  If you had a fixed rate mortgage and you did not refinance or take out any new mortgages you would owe close to $85,000 now.  So if you sold the home for $200,000 and had approx. $15,000 in closing costs you would have about $100,000 to put down on your next home.  Now you can get closer to a $300,000 home for the $1300 per month mortgage.  If you rented for that 10 years you would only get a $200,000 for the $1300 per month.

It will be yours and yours alone

Lots of people believe that if you have a mortgage the bank owns your home until you pay off the mortgage.  Actually you own the home 100%.  If you do not comply with the terms of your mortgage, like make your payment, the bank has the right to foreclose.  If the bank forecloses they will own the home only after the foreclosure is finished.

Another nice think about owning your own home is you can do what you want.  A landlord will probably restrict you from painting or other modifications to a home.  If you own it you can do what you want.  Exterior modifications might b restricted by a home owners association though.

Pay back on improvements

If the landlord allows you to make modifications.  You as a renter will get no financial benefits from them.  But as a homeowner, you may see some, all or even more than the investment back when you sell your home.