by Koren Allen

Created on: November 25, 2008

When deciding whether to rent or buy a home, there is no one-size-fits-all answer. There are many advantages and disadvantages either way you go, and the decision should be made by each individual, after careful consideration of the circumstances.

Conventional wisdom has always said that owning your home is best, and there are several reasons this is true. Owning gives you equity to borrow against if needed. And because you are not paying a landlord, the money you invest in your home essentially stays in your pocket; an investment in your own property is akin to paying yourself in the long run, providing the housing market stays relatively stable.

However, "conventional wisdom" happened before the current mortgage crisis, before the collective American mindset of having it all right now and paying later, before second and third mortgages were commonplace. "Conventional wisdom" never assumed you would get upside-down in your house, owing more than its worth - but sadly, it is a way of life for more and more of us.

Financial aspects need to be considered. When doing a comparison of rent payment vs. mortgage payment - be careful. Your mortgage payment does not give you the full cost of home ownership. You must consider major and minor repairs, maintenance, upkeep, yard work and landscaping, property taxes, and the list goes on and on. If you rent, your landlord should bear the brunt of most of these costs - particularly for major repairs such as a new roof. Not everyone is fortunate enough to find a responsible landlord, but the advantage of renting is that if you find yourself in a miserable situation, you are not stuck for 30 years.

Another aspect that many people don't consider is time. Are you a single parent with a full-time job and kids involved in every conceivable activity? There are only 24 hours in the day. Will you have time to keep the yard mowed and the house painted and in good repair? Do you make enough money to pay someone else to do it, and do you have the time to research, track down, and supervise plumbers, roofers, electricians, painters, carpenters, etc?

Finally, there is the issue of financial self-control. How is this relevant? With lending practices being as they are, homeowners don't need a compelling reason to acquire a second or third mortgage; the money does not have to go to home repair or improvement. Very often it goes to pay off credit card debt - which is a huge red flag that you are living beyond your means to begin with. Just like alcohol, credit can be an addiction - and you must know your limits. If you are honest enough to admit you cannot handle credit responsibly, then it might be wise to rethink owning a home that you can turn around and borrow two to three times the value on. You might be buying the gun that you shoot yourself in the foot with later.

In most circumstances, home ownership is still the most solid way to build financial stability for yourself and your family. But for some people in some circumstances, renting may be a better option, so each person should look at their own situation and make the best individual decision.

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