Real Estate Tips

Home: To Own or to Rent? (Part 2)

The question of whether it is cheaper to own or to rent a house deserves short shift. Few people actually seek the answer; the nearest issue is a matching of the satisfactions of tenancy related to its cost against the satisfactions of homeownership related to its cost. An attempt at direct comparison of tenants’ and owners’ costs is fruitless for these reasons: 

1- In real life, the comparison is not between equivalent dwellings and thus not between equal services received.

2- The costs of different dwellings types are not comparable

3- One of the largest costs of homeownership (depreciation) is not determinable without knowing the cost of acquisition and the proceeds from the sale at disposition. But the selling price will be strongly influenced by market conditions at time of sale, which is indeterminate

4- In a changing housing market, there are times when homeownership is a better bargain. There are also other times when market conditions favour tenancy. 

The true financial issue of home ownership is whether the family can meet the financial obligations without sacrifice of other officials. In many instances, sacrifice is required; undertaking the purchase and maintenance of house calls for reductions in other outlays, and the choice is open to each family. But in no event should the health and happiness of any member be endangered.

Certain financial advantages of homeownership are frequently presented by its proponents:

1- It is an excellent and safe depository of savings; a hedge against inflation.

2- Payments on the mortgage represent enforced savings which might not be accumulated but for the contractual obligation.

3- Home ownership is an aid in establishing a favourable credit standing.

4- Income tax regulations permit the deduction of property taxes and interest on the mortgage debt.

5- When the homeowner sells his home at more than he paid for it, he is subject to no capital gains tax provided that he purchases another home of at least equal value within a year.

On the other hand, the tenant retains greater financial flexibility. At the end of his lease term, he is free to adjust his housing expenditure to either a decreased or an increased income by moving to another dwelling.