Since buying a house will probably be one of the most significant purchases of your life, it is important to calculate the pros and cons of buying versus renting a house. Many people are not familiar with all of the costs associated with owning a home and they end up realizing buying was perhaps not their best option.

• Significant cash outlays
  

To begin with, you have to be aware that buying a house requires significant cash outlays. If you take out a loan to buy your house, you will have to pay interest expense to your lender. Unless your down payment is notably high, expect for your interest expenses to be very large during the first few years. Troy Adkins, Investopedia’s author expert in institutional investment, gives this valuable example:

“A loan rate of 5.3040399% on a 30-year fixed rate loan will require you to pay back exactly twice the amount of the purchase price you agreed to pay when you bought the home, while a loan rate of 9.3967767% will require you to pay back exactly three times the amount.”

The cost of interest can become huge and must therefore be taken into account when planning to buy a house especially when the amount of interest alone could be greater than the rent of a comparable place to live. Along with the expenses due to the interest, you also have to add the costs of maintenance, property taxes, natural disaster insurance, private mortgage insurance (PMI), closing costs and brokerage fees.

However, interest expenses are tax deductible, which for some homeowners can be a true benefit. Evaluate how much value this benefit represents for you. If you have a large loan and have a high interest rate, these deductions could be significant.

• Resale Value

Another benefit from owning a house is its appreciation in value. Recent years however, have proven it is not always the case, and those already owning a home have seen its value decrease. But for new homebuyers, since home prices are at their lowest right now, chances are they will increase in the long term. Still, for your house to appreciate in value, you will need to maintain it and make necessary repairs continually. Also, keep in mind that after the resale, you will still need a place to stay. Therefore, the resale of your home will represent a benefit only in the event that the expenses related to your new residence will be lower than the price obtained for the house. In case you’re thinking about buying another house in the same geographical area, it is likely prices will be similar and so you gain nothing from the sale. You can then move to another area or move to a smaller house. This is especially true for couples and families whose children have left the parental home and for whom the house is now too big.

For those not wishing to sell the house, the benefit of owning your house is that you can leave it in inheritance to your children, who may live there, rent it or sell it later.

• Compare
  

We invite you to take a look at the table below, which compares the median monthly housing costs by state for Owner-occupied versus Renter-occupied housing units. The data presented below comes from the American Community Survey 2004.

You’ve calculated all the pros and cons of buying a house and you conclude you’re ready to buy one? A new series of steps is waiting for you!