Buying a home is a huge life decision. In most cases taking out a mortgage and owning ones own home generally is considered one of the biggest decisions an individual will make in a lifetime. Both renting and buying a home have benefits and costs.

When a consumer decided to purchase a home, they will most likely need to borrow the money to purchase the home. The high majority of individuals who take out a mortgage will not have a lot of money to offer as a down payment on the loan they are taking out and therefore will carry a higher interest rate. Because a mortgage is compounded monthly, the interest is charged monthly. For almost the first five years of home ownership, the home owner is not paying any significant amount of principle down on the mortgage, but is mainly paying interest on the loan. Because the payments are mainly interest, equity is hard to build in a home unless one of two things takes place. One, the home owner decides to stay in their home for a long number of years or two the price for homes increases dramatically.

If a home owner is planning on owning a home for a shorter period of time and the housing market is relatively stagnant, then renting could be a better road to take. When closing on a home, a myriad of closing costs will suddenly be charged to the buyer. These costs could cost as much as three to eight percent of the entire homes price and in a stagnant housing-market, it could take years to put that much equity back into the home to even recover the closing costs.

Outside the debate of whether owning or renting is more investment worthy, there are other things to consider. Some of the benefits of owning a home include the tax write-off. When one owns the home, the government will allow an individual to write off the interest from their income. Renters receive no such write-off. Home owners have different payment options when it comes to the financing the mortgage whereas a renter takes what a homeowner offers.

Some of the benefits of renting include a relaxed attitude towards the maintenance. A renter does not have to worry about the costs of maintenance as the landlord is usually in control of that aspect. A renter is not bound down by a mortgage or a bad housing market. As long as they serve out their contract, the renter is free to leave a neighborhood or a community without going through the hassle of selling the home.

In truth, the real determination and key to if an individual should rent or buy is simply the long term goal. If a person is planning on staying in the same home for more than a few years, then home owning could very likely prove to be a profitable as the home appreciates in value. Also, the more a person pays on the mortgage, the less interest is involved in each payment and more of the principle gets paid down.