Buying a home is a huge life decision. In most cases taking out a mortgage and owning ones own home generally is considered one of the biggest decisions an individual will make in a lifetime. Both renting and buying a home have benefits and costs.

When a consumer decided to purchase a home, they will most likely need to borrow the money to purchase the home. The high majority of individuals who take out a mortgage will not have a lot of money to offer as a down payment on the loan they are taking out and therefore will carry a higher interest rate. Because a mortgage is compounded monthly, the interest is charged monthly. For almost the first five years of home ownership, the home owner is not paying any significant amount of principle down on the mortgage, but is mainly paying interest on the loan. Because the payments are mainly interest, equity is hard to build in a home unless one of two things takes place. One, the home owner decides to stay in their home for a long number of years or two the price for homes increases dramatically.

If a home owner is planning on owning a home for a shorter period of time and the housing market is relatively stagnant, then renting could be a better road to take. When closing on a home, a myriad of closing costs will suddenly be charged to the buyer. These costs could cost as much as three to eight percent of the entire homes price and in a stagnant housing-market, it could take years to put that much equity back into the home to even recover the closing costs.

Read the rest of this entry »

Related posts

• Buy or Not
• Looking For Homes For Rent to Own Here Are Things to Consider!
• Benefits of Renter’s Insurance
• The Search for the Good Renter
• Purchasing a Home through Rent-to-Own