Should You Buy A Home Or Should You Keep On Renting?

If you currently don't own your own home you might be wondering.... should I take on a mortgage loan and buy a house or should I just keep renting?

To figure the question out of mortgage loan or rent, you need to do an analysis on the cash flows of buying a home and mortgage verses renting. Also you would need to determine the length of time that you plan to live in the home or area.

The cash outflows from renting would be:

1. A security deposit
2. Utilities
3. Monthly rent.

The cash inflows would be:

1. The deposit returned when you leave
2. Any monthly savings in the difference of a lower rent payment verses a home payment.

When buying a house the cash outflows include:

1. The down payment on the house
2. Points, closing costs
3. Mortgage payment
4. Property taxes
5. Insurance
6. Home maintenance costs
7. Utilities
8. If the house eventually sells for less than the purchase price.

The cash inflows :

1. Tax deductions for interest, points, and property taxes
2. Any rental income from the home
3. The appreciated value if the home sells for more than the purchase price.

Also consider the length of time that you plan to stay in the area. If you plan to stay for many years then buying a home might have an advantage--a fixed rate monthly mortgage payment will stay pretty much the same over the course of time that you spend there where your rent payment will increase to keep up with the rising rate of inflation and the supply and demand of apartments or rentals.

If you plan to stay a short period of time then renting might be a better option because of the cost of the down payment,points and fees associated with buying the home.