Is Buying a Home Better Than Renting One?
Most people just take it as a given that they owning a home is better than renting one. In reality this is far from always the case; things are much more complex than that. So, is buying a home better than renting one?
The answer to whether or not you should buy a house or rent one is really that it depends on your goals. One of the most widely touted reasons to buy a house is that is an investment and that it is an excellent way to build your wealth. If that is your reason for buying then you are better off renting. As an investment a house is generally not a good one. The belief that many people have that real estate only goes up in value is just not true. In reality the returns on real estate are about the same as you would get from the stock market however since owning a house comes with a number of additional expenses you would actually be better off putting your money into the stock market.
The other big reason that a lot of people think they should buy a house is that the money that they pay in rent is basically wasted but the money that goes into owning a house is going towards building your wealth. This is another one of those things that is just not true. When you factor in what you pay in interest, taxes and maintenance on your house you are actually losing even more than you would be renting, at least for the first twenty years or so of your mortgage. As a general rule if your goal is to build wealth then the best option is to rent and put the difference between the rent and what it would cost you to own a house into the stock market.
One reason that a lot of people buy a house that may actually be a good idea is that it is basically a forced savings plan. It is not really the best way to build your wealth but it is better than not doing it at all which is what many people do. It is all well and good to say that you should put the difference in the cost of renting and owning into the stock market but this requires that you actually do it. At the very least if you own a house you do have to pay your mortgage which means that you are basically forced to save your money.
Perhaps the biggest reason to buy a house however is simply that you want to. It may not make the most financial sense for a lot of people but when you own a house it is yours and you can do whatever you want with it, this is a major attraction for a lot of people.