Rent Vs Buy Analysis becomes necessary when you relocate or thinking about wealth building through home ownership. You should consider all the positive and negative aspects of both sides to make an informed decision.  Most importantly compare the costs of buying and house and renting against your financial capability. Buying costs include payment of various taxes, insurance and utilities in addition to mortgage payments.  The deposit requirements and the recurring expenses towards payment of rent or mortgage must be calculated to be able to assess the viability of both choices. You should do a thorough Rent Vs buy analysis to weigh the pros and cons each option and base make your decision on the facts rather than advice from family or friends.

Renting Your Home

The initial deposit to rent a house is a nominal amount as against the huge initial deposit required for availing a home mortgage. The burden of the mortgage is on the owner whereas the renter can just pay the rent and live there without any tension of mortgage payments or other fees and penalties associated with it. Taxes, insurance payments and repairs also are the responsibility of the home owner. The disposable income saved by renting a house can be invested in lucrative financial vehicles so that you can save for the deposit for buying a home at a later time. Having a good credit history helps in obtaining a mortgage with lower interest rates thus saving you a lot of money. The disadvantage of renting is that the rent you pay does not help you in anyway. The rent paid will not help you build your assets nor will it guarantee any financial security.  The owner may ask you to vacate if he wants it for his own use or if he decides to put it up for sale. The other disadvantage is that you cannot do any modification to a rented home.  You may also tend to splurge any disposable income. There is no way you can build your asset by building equity in the house and if you do not contribute enough to savings you may end up paying rent all your life.

Buying Your Home

The major advantage of buying a home if you have enough savings to meet the down payment is you are building equity in the property that you own.  The monthly payment towards mortgage is also a forced savings which goes to build assets for you. You can even use the equity built in the house to buy another property or to make other investments. You can even borrow money for any emergency using the house as collateral security.  You can make improvements to the house according your needs and taste. After paying off the mortgage you can build savings further. The mortgage payment decides your lifestyle and the fluctuating interest rates may be a cause of concern as you may be required to pay higher sums within short notices. The home ownership is a long term commitment and you can build equity though you may not have enough disposable income left. Rent Vs Buy analysis will ideally lead you to make the correct decision based on your needs and financial situation.