Homeownership vs. renting: How are they different?

You've seen the debates that go on and on about which is better, renting or buying a home? But many people don't understand how they're different and as the 2013 home-buying season is underway, it's important to lay out how the two options are different. Both carry their respective pros and cons and as you start to think about long-term plans, the following tips will help you understand how they are different:

Mortgage vs. rent

Renting allows you to live in your home for a specific period of time with certain provisions and rights given to you by your local landlord/tenant code. There may be some leases and contracts that even allow you to leave early if certain requirements are met (security deposit, job relocation, military orders, etc.). So you have more freedom within a rental agreement if you have a lifestyle that may require that you move on a fairly frequent basis.

A mortgage is long term and as long as you pay it, then you're free to stay in your home. The caveat here is that even if your financial situation changes such as losing your job or a source of income, you are still required to pay the mortgage throughout the remainder of the term. The same goes for renting but in many cases, you are given a few options to break the lease and move on from that financial obligation.

Tax deductions

Paying a mortgage allows for certain tax deductions that renting does not. However, consider that when renting, you have the option of paying less and controlling how much you pay depending on where you choose to live. When you own a home, HOA fees and property taxes can increase, which changes the amount you pay on a yearly basis depending on whether an increase is approved. Still, the tax deductions from owning a home may offset some costs of homeownership that many homeowners find beneficial.

Freedom to move as you please

Many value their freedom to move as they wish; thus, renting works well for them. If the neighborhood becomes seedy and undesirable, the option to move is just a few months away depending on when the lease ends. However, when owning a home, while you can move, you're still on the hook for the mortgage. If you decide to sell, then as you already know, we live in a tough housing market and doing so at the time when you need to may not always be possible. Renting the home out to someone else may be the quickest option while you decide if selling is best for your long-term goals.

These are just a few of the considerations you have to take into consideration when buying a home or choosing to stay put and rent for a time. Renting isn't for everyone and neither is homeownership. Both options must be considered based upon your lifestyle and even your personality. Choose wisely.