Rent or Buy a Home?

The crisis in the housing market provides an opportunity for consumers looking to snap up a bargain home. But the economy is still in dangerous territory, so many consumers may not have the financial security needed to buy a home.

Home ownership has long been viewed as an integral part of the American dream. After all, the equity you gain in your home can provide a strong platform to further your financial goals.

However, the heady days of home values doubling in 10 years are gone. In fact, median home prices nationwide are down 6.3% from last year, according to recent data from the National Association of Realtors, and more than 20% in parts of Michigan, California and Florida.

Gone, too, is the assumption that if you can afford a home, it must be a good investment.

In order to determine if it's the right time to buy, you must weigh a number of factors.

Your financial outlook for homeownership rests on the break-even point -- how long must you live in a home for the equity gains to outweigh the higher costs of home ownership.

To determine this, consider how much your home will appreciate in value and how quickly you build equity, as well as the higher costs of owning versus renting and what you could have earned by investing your money rather than using it as a down payment. The Rent versus Buy calculator from BankingMyWay.com can help you wrap your head around some of those numbers -- and provide an estimate of how long it will take you to break even.

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