In this episode of Old National’s Real Life Finance, we are going to discuss the differences between renting and buying a home.
Deciding where you are going to live is a big responsibility! Let’s take the time today to understand the differences between renting and buying a home.
First let's look at renting.
- You’re not committed to a long-term contract. Renting offers leases, which usually offer a short-term contract, with monthly payments that may be lower than that of a mortgage.
- A security deposit is normally asked for at the beginning of your lease. This is much less than a large down payment needed for a mortgage loan.
- Your credit history may be looked at to show you can pay your bills on time but will not be looked at as closely as a mortgage lender would.
- Payments made a few days late may not impact your credit score.
- You aren’t typically responsible for repairs needed.
- Sometimes, your utilities and water may be included in your rent.
Now, let’s look at becoming a homeowner. Here are some advantages of buying:
- Each time you make a payment on time, it will go to help build equity and your credit
- Homeowners usually have tax deductions they can claim when filing year-end tax returns.
- When the housing market increases, and you decide to sell your home, you can make a profit.
- If you want to make improvements to your home (a new bathroom, update a kitchen, landscaping), you can do that! With renting, you are usually restricted on what you can and cannot do.
- If you choose to make improvements in your home, you can borrow against your home’s equity to finance your projects.
Buying a home is one of the most substantial personal and financial decisions you will ever make. Be sure to talk to a mortgage loan originator to see what options work best for you!
Thank you for watching today. To continue your financial education look for additional Real Life Finance videos from Old National.
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Nashelle is responsible for enhancing financial education initiatives at Old National by partnering with schools, colleges, universities, businesses, nonprofits and government agencies in the Indianapolis area. Her goal is to address community needs and implement financial empowerment programs based on sound money management skills.
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