There is a long-held belief in this country that buying versus renting is always better. If you can own your own home and gain money through appreciation, that’s better than throwing money down the drain with renting. But is that really true or a myth?
Some believe that owning a home actually makes less financial sense than renting. Home ownership comes with a lot of expenses including interest, property taxes, repairs, etc. In working out what is gained with what is loss (including inflation), it’s found that in actuality, nothing is gained and you basically break even. However, if you were to take the excess that you gain by renting instead of buying and investing that in stocks, you yield about 7 percent; this means you actually make money.
Another aspect on owning that you have to consider is mobility. When you own your own home, you really need to live in the home for 10 plus years for it to be worth the expenses (including paying 1 percent in closing costs and 6 percent to realtors when you sell it). So what happens if three years after purchasing your home you lose your job? If you own, you now have to either find a job in the same area, which could severely limit your earning potential, or move away and have to sell the home, more than likely taking a loss. However, when you rent, you can easily move to a new area if there are no jobs in your current area. Many renters have leases which allow them to give their landlord a 30-day notice and then move out.