Renting versus Buying

Should I Rent or Buy?

Naturally, the decision to rent or buy a home is a personal one and there are no one-size-fits-all answers. However, the following are a few things to consider as you make your decision.

	If You Rent	If You Buy
Cost	Deposit, monthly rent payment, renter's insurance, and utilities	Down payment, closing costs, insurance, property taxes, utilities and more
Payments	Rent can go up at the end of your lease	Fixed-rate mortgages stay the same
Tax savings	None	Mortgage interest, taxes and most mortgage loan points are tax deductible
Equity (the portion of the property you own)	None	Increases with every mortgage payment; may go up if your home increases in value
Moving	Easy to move out; possible cost if you move before the lease is up; landlord may ask you to move at the end of a lease. A "military" clause in the lease or renter’s agreement should allow you—without penalty—to break the agreement if you are transferred or decide to move on-base before the lease ends. Consider having your base housing office review the lease before you sign it.	Takes time and costs money to sell; can be rented, but you will have to manage the property from your new location
Timeframe	May be best if you will be living in an area fewer than three years	Can make sense when you have five or six years, or when you think you can sell the home in a short time at a higher price

I Want to Buy a Home. What Should I Consider?

Homeownership is the American dream—and a big responsibility. Before taking on a mortgage, ask yourself the following questions:

• Can I afford to buy a home? You may qualify for a VA loan (if you have completed 181 days of service) and may not have to make a down payment. Still, you need to be prepared to pay other expenses such as property taxes, utilities, and routine maintenance. How much of your mortgage payment will the housing allowance cover? If not 100 percent, can you pay the difference? To learn more about VA loans, visit the U.S. Department of Veterans Affairs Web site.



• How easily could I sell a house in this area? The economy, as well as housing trends, change. A “hot” housing market can go cold—almost overnight. How long could you afford your mortgage if your home stays on the market after you are transferred?



• What tax issues would I face if I sold my home? If you must sell your home but have lived in it fewer than two of the last five years, you may face capital gains tax if you sell the home for more than you paid for it. However, the Military Family Tax Relief Act may enable you to avoid paying that tax. This is a complicated tax area and is affected by several factors such as the amount of the capital gain. For more information, talk to a tax advisor or read the Armed Forces’ Tax Guide, IRS Publication 3. It is available on the IRS Web site or request a copy by calling 1-800-829-3676.



• How easily could I rent my home? Instead of selling, you could rent your home when you are transferred. Consider who would provide the necessary maintenance. How would you deal with renters who damage your property or fail to pay rent? There are property management companies that will take on these jobs—for a fee. Would the amount that you can reasonably charge in rent be enough to cover your mortgage expenses and the cost of this service?

Before jumping into homeownership, consider talking with a housing counseling office. Housing and Urban Development (HUD) can put you in touch with a free counseling service. Just call 1-800-569-4287.