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Business & Merchant

By Roger Dolanch

Although housing prices have increased slightly over the past year, low mortgage rates have kept homeownership from becoming more expensive than renting. In some areas, rents have risen to keep up with demand. Rising rents continue to make buying look cheaper in comparison.

Economists teach us that buying a home will continue to beat renting until mortgage interest rates hit 10.6%. Trulia's 2014 Rent vs. Buy Report shows us that homeownership in the United States is on average still 38% cheaper than renting! In Southwest Pennsylvania that percentage can grow to over 50% in some areas.

Many Americans see buying a home as an essential step in a successful life, and owning one can bring significant financial benefits.

The upside is that a home can significantly increase in value over time. The median sales price of existing single-family homes rose 81% from 1993 through 2013, according to the National Association of Realtors.

Many homeowners also can deduct mortgage interest from their income-tax bills along the way.

In addition, homeowners can tap into the equity in their homes for big-ticket expenses, such as college tuition, at interest rates that can be lower than other financing options. Caution is required because homeowners do not want to be saddled with debt they can't easily repay.

Homeowners also don't have to worry about a spike in rents. Monthly payments are known well in advance.

As they age, homeowners can enjoy another benefit. If they pay off their mortgages around the time they retire, their housing costs can drop significantly just when they may want extra cash for travel, medical expenses and the like, says Chris Mayer, research director at the Paul Milstein Center for Real Estate at Columbia University.

Still, owning a home can be well worth it for personal and psychological reasons that go beyond financial calculations. There is that innate sense of security, accomplishment and control that comes from owning your own home. After all, you can have pets, redecorate or alter the property as desired when you own.

To calculate whether buying or renting makes more sense financially, you need to have a sense of your monthly costs in each case, including rent, mortgage payments, taxes, insurance and other related expenses that may apply to each option—as well as whether you would be more likely to spend or invest any savings from renting.

The verdict could differ considerably between neighborhoods and the style and size of the homes you are exploring.

An easier way to conduct research is to visit the following web address: http://www.realtor.com/home-finance/tools/rent-or-buy-calculator.

Until you actually speak to a reputable mortgage lender, you may not really know your personal affordability index. It is worth a call and a few minutes of your time to discover what your true choices are.

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