VA LOAN CAPTAIN BLOG & Learning Center

Renting vs. Owning: The Basics

By: Grant Moon 01/13/15 11:54 am

For those still renting, especially those in their very first apartment, buying a home might feel like an event so very far into the future. Buying really hasn’t registered and the priority is how much rent will be and how close to work is my apartment. But just to get a glimpse into the differences between renting and owning, here are a few tidbits.

It’s that time of year when W2 forms start arriving and when owning you’ll receive one more form—the IRS 1098INT. This is the form reporting how much interest you paid to the mortgage company last year. As a renter, you probably don’t itemize your deductions. As a homeowner, you likely will. Mortgage interest is an income tax deduction. When figuring how much tax you owe or how big a refund you’ll get, mortgage interest is first deducted from your taxable income. Your tax bill is lower. Or, you refund is higher. So too property taxes.

As a renter, when things break or need fixing, you call the landlord. As an owner, you’re the landlord. If the hot water heater goes out it’s time for a trip to the appliance store. A renter typically doesn’t own any of the appliances in the unit and isn’t responsible for maintenance issues.

Each month when you make the rent, you’re building equity for your landlord. Because you don’t own the unit, the increase in value doesn’t affect you, other than the possibility for higher rent later on. In line with that, with a fixed rate mortgage your principal and interest payment will never change. When you own, each payment pays down the loan balance as your equity increases over time.

Paying your rent on time every time as well as paying your mortgage payment on the 1st of each month means you handle your finances well. When you rent however, at the end of the lease your landlord may decide to increase your rent, move into the unit as a primary residence or sell the property. When you own, the property is yours.

Buying a home will likely be your greatest financial commitment in your lifetime. You hear that a lot but it’s true. It takes some time to move into the mindset of home ownership and if you’re not ready don’t worry about it. The time will come when you are in fact ready to make the move, just like millions of others already have.

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