To buy a house or to rent an apartment? That's a big problem. There are solid reasons for doing so. Buying a house can build up your equity, enjoy tax and interest deduction, save money in rent. You can choose the model and floor plan you like. You can enjoy the freedom to change décor and landscaping, also the freedom to have pets, and so on. In addition, buying offers more spaces and comfort. .
Financially, buying a house has many advantages over renting an apartment. An important consideration for many renters is the cost of owning a house. Some people assume owning costs more than renting. On the surface, buying a place seems a lot more expensive than renting. Actually, owning a house doesn't have to cost more than renting. In many cases, the amount of money a homeowner spends on mortgage can even less than a renter spends on rent. Take my own house as example, we borrowed $140,000 from bank with 5% fixed interest rate for 15 years. Our monthly payment is $1100, half of which is mortgage interest, half is principal. Interest plus property tax $400, our monthly housing cost is $950. Besides, we can use itemized deduction of mortgage interest and property tax on our Income Tax statement to further reduce our cost. With all the tax deduction, our actual cost is less than $800 per month. Even better, our interest is decreasing every year. As time goes by, we'll pay less and less on our house. Meantime, we're building up our equity with the other $550 monthly payment. The house's value is increasing year by year. Eventually, the house will belong to us. .
If you rent an apartment, you don't enjoy any tax benefit. You don't have any equity build up. It rarely makes sense to spend a big share of your take home pay on your rent, while you can use that money to buy your own house. It's just like you throw your money away. Even worse, you don't have control over rent increase. In some good years, your rent may increase 5% every year.
