Should I Rent Or Should I Buy? And Benefits Of Owning A Home?
If you’re looking for housing, you may be wondering whether renting or owning a home is better for your bottom line.
The truth of the matter is that there are plenty of factors to consider about this decision - your individual circumstances, financial situation, future plans and much more. While homes are traditionally thought as a form of building wealth, renting a home has several advantages that may be more valuable.
What Matters in Housing
When considering whether it’s in your personal best interest to rent or to purchase a home, you’ll need to weigh important factors against one another:
- Monthly housing costs
- How long you intend to stay in the same area
- Real estate market conditions in your area
- Where you live,
- How many family members make up your household
- How much money you make
- Your lifestyle and cultural expectations
- Your savings
In short, every situation is different and there is no single answer that’s right for everyone. Let’s take a general look at the pros and cons of each living arrangement to figure out which is the right decision for you.
Should I Rent a Home?
The following are some of the most common reasons why you should rent a home:
- Your market is too expensive to own, including property values and taxes
- You are saving up money for an upcoming home purchase
- You plan to relocate in the coming months
- You are planning to move in with a romantic partner, but want to stay flexible
- You intend to travel and not have the responsibility of a home weighing on you
Pros of renting
- You can avoid the cost of maintaining a home, such as homeowners insurance and property taxes.
- Because of changing circumstances, having the flexibility of a rental property’s lease enables a quicker and less expensive alternative to homeownership.
- Renting is cheaper in the short term when compared to the cost of a mortgage’s down payment and related fees (upfront and long-term).
Cons of renting
- Fluctuating costs of rental properties can be frustrating. If a landlord decides to increase rent, there are very few things you can do to avoid this unless you choose to move out.
- Monthly rent is comparable or substantially more expensive than most mortgage payments.
- Unless you sign up for a special program that documents your consistent rental payments, most rent payments won’t build your credit history.
- Making modifications to a property that you rent is more difficult and requires approval from a landlord.
- Instability is a big issue with renting, where it’s hard to feel a sense of ownership with a property that is not yours.
- Depending on your lease, your landlord may have the ability to kick you out of the property or choose to not renew a lease to you with short notice.
- Renting is still expensive. Considering most people have to pay first-month’s rent, last-months rent, security deposit, and any application fees, renting is still cost-prohibitive and a big investment.
- Landlords may charge a pet deposit for any animals you have at the house.
Should I Purchase My Own Home?
The following are some of the most common scenarios where owning a home is ideal:
- You’re looking to settle down in an area
- You have a steady career based in the area
- You are planning on moving in with your significant other
- You plan to build wealth by retaining equity in your property
- You want to save money by paying mortgage payments versus
Pros of buying
- Peace and quiet
- stable costs
- Owning a home is a great investment opportunities, as homes generally increase in value and help avoid inflation (versus other investment vehicles
- Homeownership gives individuals a sense of place and belonging in the local community that rental properties do no.
- You can make any modifications to your home as you see fit.
- Your mortgage payments are more stable for most loan types, enabling a better way to budget for the future.
- Your home can be used as an AirBnb or vacation rental to generate extra income as needed.
- The interest that you pay on your mortgage is tax-deductible, meaning more savings and bigger returns at the end of the year.
Cons of buying
- A home is a long-term commitment. If you decide that you want to move, it can be hard to extricate yourself from a home without losing money on a home sale.
- Home’s require routine maintenance and upkeep to stay afloat. Small problems can become big problems in no time, costing thousands of dollars and tons of free time.
- Property taxes are a big issue with homeowners. While rent is stable, taxes generally increase per year and can severely cut into your budget overtime.
- If your family is growing, you may soon discover that your home is too small. Unless you choose to do major renovations (or have the property space to do so), a home can quickly become unsuitable.
- If your financial situation changes unexpectedly, you may find yourself unable to meet repairs and mortgage payments. Homes going into foreclosure can mean serious financial losses, not to mention the general bad feeling many people feel from the experience.
- Homeowners may be more inclined to stay in jobs they dislike in order to keep a roof over their heads.