Buy or Rent : The Cardinal Housing Dilemma

I used to think of buying a house as a very good investment till I came across this hub by Jamagenee on why the author rents instead of owning. The hub got me thinking as to how to solve the dilemma. We'll be discussing the pros and cons for both of the options but ultimately the decision has to be yours.

Hasn't buying a home always been THE Dream, so why the sudden interest in renting, you might say. Well, in the times of the  real estate boom, with ultra low interest rates and plethora of mortgage options, people went on a buying spree that raised  housing rates to unprecedented and largely unrealistic levels while the rise in rents was comparatively so nominal that renting was the new buzzword of the town. But the present scenario has seemed to level things with everything falling off the cliff. And hence we ponder over the dilemma of buying vs. renting:

BUYING: Can I / Should I / Will I  ???

Buying a house is a lifestyle choice as well as a financial one and comes with its own sets of benefits and detriments...

·         Appreciation: When we talk about appreciation, there is usually an 'if' attached... If your property appreciates, you make a tidy profit but you make not so tidy loss  too if it depreciates. What we have to consider here is that, in the long run property Does appreciate 9 out of 10 times. And by the long run is meant a period of around 10  years at least. Buying something and expecting it to appreciate overnight is gambling, not investing and I don't gamble with my life's savings.

·         Tax deductions: This is one reason you'll find buying advocates shouting over and over again. When you buy a house,  the interest you pay on your mortgage is tax-deductible, you can also claim property taxes you pay as an income tax deduction.

·         Tax-Free profits: You can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains,  as long as you have lived in your home for two of the past five years.

→ Of course, because tax rules vary based on income and other factors, be sure to consult an accountant or financial advisor about your particular situation  and the present norms.

·         The Psychological factor: I don’t have to explain what it would feel in your own home; you can paint those walls turn up the music and there is that sense of stability and security that’s elusive in a rented place.

WHY NOT:

Buying a house may turn from a dream to your worst nightmare if you don’t tread with caution. Here's why:

·         Bindings: Think everything out before binding yourself to a cycle of making payments for the next 20-30 years. Make sure that you can handle your finances not only today but also in the downturn markets.

·         Check, Check: You have to keep your payments in check and ideally should not allow them to account for more than 30-33%  of your gross income.

·         Costly affair: The side-effects of buying a house i.e. the extra costs due to repairs, insurance, maintenance etc. are usually a big turnoff.  Keep in mind that these expenses will come along whenever it may be that you decide to buy a house.

NOTE:

CREDIT SCORE: Your credit score is one of the most important things to consider when thinking about a home as it will decide what amount you'll pay for the next decade. Here's a little more detail. 

Ultimately, its you who has to decide whether the time is right for you, if you have the financial   stability and also whether the market is not too overpriced.