You’ve reached a crossroads, looking down two different housing paths: to rent or buy?
The right decision depends on the situation. Maybe you like the wide flexibility of renting rather than the paved security of buying. Maybe you’re ready to pluck the overhanging fruits of equity and tax benefits that come from buying, rather than enjoying the open air of renting’s short term commitment.
With that said, you still should understand both options to decide which is better for you. That’s where we come in – here are just a few of the pros and cons when it comes to renting versus buying.
1. Flexibility. Buying is a big commitment; renting not as much. And that can be a good thing. Renters are better able to adapt to big changes in life such as a new job or a relocation because they don’t have to worry about the market value of their residence, unlike buyers.
2. Limited Unexpected Costs. If the air conditioner breaks or you find a leak in the roof, you’re usually not footing the repair bill.
1. Poor wealth accumulation. When it comes to generating savings, renting can’t hold a candle to buying. The money that you pay monthly with renting is out of your hands and never to be seen again – unlike buying, where you’re continuing to invest in your own home through monthly mortgage payments. In other words, your rent is probably paying your landlord’s mortgage.
2. Rent can rival mortgages. You may think that rent is much cheaper than a mortgage, but you may only be right about the short-term. Long-term mortgages are often times less expensive or comparable to your monthly rent.
3. Limited home makeover possibilities. Don’t like the color of your kitchen? Wish that your door had an actual doorknob that functioned? There are only so many requests for changes you can put in with your landlord. It’s best to make sure you can love the home you plan on renting, because the possibilities of altering it are often times limited.
1. Tax benefits. When you own a home, your mortgage interest and your property taxes are all deductible. Ah, the perks of being a homeowner.
2. Earning equity. Equity, or the price at which your house will sell minus what you still owe, increases each month you pay off your mortgage. This is essentially a ballooning asset that could eventually turn into a profit once the market favors buyers. Pay now and profit later.
3. You’re in control. The low overhead of rent has a downside: being limited in the changes you can make to your home. But when you own the home, you call the shots. Say goodbye to that noisy washing machine! And how about installing a new front door? You’re on it.
4. Predictable payments. Rent payments are notorious for changing with the market – not so with housing payments. A fixed-rate mortgage ensures that your principal and interest are not going to jump from year to year.
5. You don’t have to move unless you want to. Moving can be a headache (and expensive). When you own your own home, you can avoid the burden of having to move due the sale of the property or the lease running out.
1. More responsibility. Homeownership comes with more responsibility than renting, which could mean more stress (except if you’re proactive and organized!). Taking out a home warranty can take some of that stress and worry away.
2. In the hands of the market. Compared to renting, your flexibility diminishes when you make a large investment in a home. This is because you want to one day make money off that investment, and the market ultimately determines the price. But don’t worry — the market regularly changes from unfavorable to favorable, so a little patience goes a long way.
3. Thought of a Down Payment. Unless your bank account has enough cushion to pay for your new dream home in cash, you’ll have to take out a mortgage. Many people are still working towards a savings, and others are paying off student loans. Despite word on the street, you don’t need to put down 20%. There are programs for qualified candidates that allow for a down payment as low as 3-5%.
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