There is an age-old debate on whether or not it makes more

sense for people to rent or buy. Though it is hard to really

understand why there is a debate at all. You will definitely

hear arguments from both camps that appear logical but if you

do a little digging you may find that some of the arguments are

thin at best.

The simple fact of the matter is you are always better off

making a mortgage payment over a rent payment if you can afford

to do so. It is not uncommon for mortgage payments to actually

be lower than many rent payments are. So the key is to

understand an important, fundamental difference between making

a rent payment and making a mortgage payment.

Rent payments are made on a monthly basis for the most part.

That money gives you the right to live in the house or

apartment for the specified period of time, typically one

month. You receive no other tangible benefits from that rent

payment. It does not improve your credit score, it does not

produce equity, it simply gives you the ability to live in the

residence.

A mortgage payment, first and foremost, also gives you the

ability to remain in the residence, however, it does much more

than just that. First, the mortgage payment helps you build

equity in your home. Equity is the difference between what you

owe on the property and what the property is worth. That equity

can be used for many things including debt consolidation, home

improvements, extra funds, etc. Equity becomes a powerful tool

in your overall financial plan.

Mortgage payments also include interest payments which can be

tax deductible, helping your overall bottom line at the end of

the year. Rent is not tax deductible in most cases. Your

mortgage payments will also help improve your credit score if

you continue to make payments on time. Mortgage payments are

tracked if your lender reports the loan, which most lenders

typically do. Your overall financial outlook can improve

dramatically with an increased credit score resulting from

on-time mortgage payments.

Some will argue that you are tied down to a home if you buy it,

while renting gives you more flexibility. Though it is important

to remember that if you rent a residence you are typically

obligated for a specific period of time, typically a year. If

you own a home, however, you are able to sell and relocate any

time you wish, or you can rent the residence and relocate any

time you wish. This is an important and fundamental difference

between the two. It is true, however, that how quickly you are

able to sell your home will depend on the location, its value,

its condition and the market at the time of the sale. You do

have the flexibility, however, to sell anytime you find a

willing and able buyer.

One time where renting may seem like a more logical choice than

buying is if you are going to live in a particular area for only

a short period of time. In order to determine if it makes sense

to rent or buy in this type of situation you really need to

analyze your overall financial plans. You need to get a full

understanding of any and all costs associated with you buying

the home, the likelihood you would be able to sell it or rent

it when you were relocating from the area, etc. For some, even

in a short term situation the better financial decision may be

buying, especially if they are able to rent it and build equity

on their tenant. This may, however, impede them buying a second

home, though if they have adequate credit and income they may

not have any problem buying the second residence as well.

It is difficult to come up with a scenario that makes renting

the clear cut right decision. It seems in most situations

buying, if an option for you is the better decision

financially. Though consulting with a mortgage professional is

the only real way to help determine these things as they can

give you a clear understanding of what is and what is not

possible for you. Your financial advisor can also assist you in

making this decision.

Owning your own home has many non-financial benefits as well,

however, only you can evaluate those. You know what is and what

is not important for you. You know what obligations you are

comfortable having and which you are not. The key is to

evaluate your personal situation rather than listen to those

who are convinced that one or the other is right for you.