So you’re at that crossroad where you’re deciding whether its better to rent or buy? The answer is not a straightforward one but hopefully this article will help you in your decision making. Let’s look at the pros and cons

Pros of owning:

• You’ll be able to build equity if you own your home. Every mortgage payment you make towards the principal as well as any increase in market value above what you paid for the home, increases the amount of equity you have. So for example, say you buy a house for $200,000 and you make a down payment of $10,000. That means your equity in the home is $10,000. Three years go by and your home is now worth $215,000. You now have $10,000 (your down payment) + $15,000 (increase in home value) = $25,000 of equity in the home. Note – This does not include any payments you made towards the principal balance during those three years. If you take that into consideration you’ll have even more equity.
• You will get tax breaks. You’ll typically get tax breaks on the interest payments and the property taxes you pay. Please talk to your accountant for more information about this, as laws are always changing and this is not meant to be legal or tax advice.
• You don’t have to worry about rent increases. If your neighborhood turns into the new hotspot you don’t have to worry about a landlord raising your rent every year.
• You get to make the changes you want to make to your home. You saw your dream kitchen on HGTV and now you want to gut your kitchen and do the same thing? Go for it. Tired of your dated bathroom and you want a showerhead in each direction, it’s your house do what you want.

Cons of Owning

• You’re locked into that place. Unlike changing rentals, you can’t just pick up and sell your house in a few days and move on to another one. Even if you get someone to buy your house quickly it still can be a pretty long process. With renting, you can pick up and move to another building or another country as soon as your lease is up. To some people the lease is just a piece of paper and they leave in the middle of the night and say F that landlord and his lease. I wouldn’t recommend going that route but some people do.
• The value of your home could go down. Everyone likes to preach about how the value of houses and condos always goes up. Ask those people who lost their homes during the last recession how true that is. Yes, historically, over time the value of homes typically goes up but don’t think just because you bought this home you’re going to cash out in a couple of years with a few hundred thousand dollars. Homes in all areas do not appreciate at the same pace. Keep that in mind.
• If something breaks you have to get it fixed with your own money. Leaky roof? Plumbing issues? Whatever it is, you’ll have to pay for it.
• You don’t have to worry about rent hikes but property taxes and insurance have this way of going up.

With all that said, which is better? It really depends on your situation. If you’re looking to stay in one place for 5 years or longer then owning might be better for you. If you plan on moving around for a bit or you’re not certain how long you’ll be living in your area then you might be better off renting.

For more, take a look at this Rent or Buy Calculator from the New York Times, where you can enter some data and it will suggest whether you should rent or buy.