Rent is the payment one makes to live in a house or apartment for a specified period of time. Rent payments are mostly done monthly. On the other hand, mortgage payment gives you the ability to live in a house or apartment and at the same time allows you to have ownership of the house once the mortgage payments are completed. A mortgage is like a loan used to purchase a home.Below, are the similarities and differences between rent and mortgages.
Similarities between a Rent and Mortgage
The most obvious similarity is that they both give you the rights to live exclusively in the house you are paying for and the payments are done monthly. You also have the right to allow other people to live with you in the same house for both options as long as the house is being paid for. Another similar thing to note is that the payment you make monthly reflects the value of the residence or home. The cost of rent and mortgage are going to be fairly steady. They are not likely to jump up very high or plummet a huge amount either. Tenants pay monthly rent to the landlord to get the benefit of residing in the apartment while homeowners pay a monthly mortgage payment to the lender of the loan so as to pay it off.
Whether you choose to buy a house using mortgage or buy one, a contract is usually signed by a third party. For the case of renting, you have to sign a lease that outlines the rules for living in the property, usage of the property and an agreement of how either party should communicate in case either wants to terminate the contract. For mortgage payments, there is a deed of trust that outlines how the loan will be paid back, homeowners insurance requirements, escrow payments and what will happen if you default on the loan. Both rent and mortgage payments are legally binding and if you fail to abide by the terms of the contract you can face eviction from the property and in extreme cases monetary compensation.
Differences between Rent and Mortgages
Control over the House
One major difference is that with a mortgage is you will have more control over the property that someone who is renting the house. You can choose to paint the house with the color of your choice or make any home improvements while with a rental you will have to live in the house as it is and there are some restrictions like no having pets in the compound.
Another difference is that the mortgage cost can go up and down depending on the prevailing market rates and the economy and also on the individual interest rates. The fluctuation will be by a few dollars over the course of the year whereas your rent is likely to remain the same for a long period.
Tax Benefits of having a Mortgage
Many people are unaware of the tax benefits of having a mortgage. Interest payments which are included in mortgages are the cost of financing the home. In the initial years of the mortgage term, a huge amount of the monthly payment goes towards paying off the interest owned on loan. A small percentage goes to reducing the principal amount. Your taxable income can be reduced by writing off mortgage interest payments. You will either get a bigger tax refund or your tax payable will be less. With rent payments, there is no option for this deduction.You could end up paying more taxes with the rent option than if you had chosen the mortgage option.