Why Owning A Home Is Better Than Renting

by Ken Gaetos

There is always this argument of which one is better: owning or renting a house. Both have different pros and cons depending on your situation. Most people rent a house because they cannot afford to purchase one. Others felt renting is better because they can get a better rate of return if they invest their money in stocks. In the long run, owning is always more beneficial than renting because of the following reasons:Fulfilling the American Dream - Home ownership has always been one of the American dreams. You will experience a sense of pride knowing that you own a piece of America; seeing your name on the TITLE of the house. Income tax shelter - When you take out a mortgage to purchase a house, the interest and property tax are deductible. Moreover, you’ll be able to deduct other personal expenses that are otherwise not deductible if the total does not exceed the standard deduction. Examples of these deductions are charitable contributions, theft/casualty losses, gambling losses, state income tax, medical expenses, car registration fees and other miscellaneous deductions. As you know, rental expenses are, the only tax benefit that you can get is a $60 ($120 for married couple) tax credit if you're single.Another tax advantage of homeownership is that capital gains are not taxed (subject to the IRS exemption rule) when the owner sells it. The exemption rule is that married homeowners who live at least two years in the last five years from the date the house is sold can receive up to $500,000 ($250,000 for single taxpayers) of tax-free capital gains.Builds equity - Most people say that real estate is a hedge against inflation because when there is one, just like what happened in the last few years, the value of the house increases but the payment stays the same (assuming that you have a fixed rate mortgage). For instance, a three bedroom house in 1995 cost only $200,000 with a monthly payment of $1,600. Twelve years later, the value of the house increased to an estimated price of $500,000 but the monthly payment is still at $1,600. Guess how much is the market rent right now for a three bedroom house or apartment? The homeowner generated equity of $300,000. One way to take advantage of the increase in equity is by borrowing against it and using the proceeds to pay-off higher interest credit cards or auto loans. You can also use the proceeds for any home improvement projects. In addition, the interest on the home equity loans is tax deductible. Compare that to the non-deductible interest that you are paying on the credit cards and auto loans! In essence, paying for your home is just like a force savings.When you're renting, you are not building any equity no matter how long you've been paying. In addition, the rent increases every year. Going back to the home example, a three bedroom apartment currently rents for at least $1,600, which is the same as the mortgage payment for the three bedroom house bought in 1995!

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