Buying vs. renting: What’s the best move?
Many people make the decision daily on whether they want to buy or rent a home—however, it’s a choice that is not to be taken lightly. Like everything, there are various advantages and disadvantages to buying or renting a home. We’re here to break down those pros and cons to help make your decision process a little simpler.
Buying a home
Acquiring a home has numerous advantages that aren’t provided when it comes to renting. First, the financial benefits: when you purchase a home, you build equity. If the value of your home increases, then you have the opportunity to cash in on that value if you eventually sell. Also, there are potential tax benefits—if you choose to itemize deductions, you can itemize your mortgage interest when you file your tax return and thus cut your tax bill. Not only that, if you have a fixed-rate mortgage, you won’t need to worry about the rising cost of rent.
In addition to the financial perks, there are other substantial benefits. When you purchase a home, it’s truly yours. You don’t have a landlord to answer to, which means you don’t need to worry about seeking permission for home upgrades—you’re free to make all the renovations you desire. You also eliminate the possibility of your landlord selling the home and having to quickly scour for a new place.
Lastly, there are some intangible benefits. When you buy a home, you feel a sense of pride and accomplishment—you’ve finally achieved your lifelong goal of buying a home. While there is a sense of pride in being able to pay your rent and bills, finally reaching your goal of purchasing a home is an entirely different feeling. There is also a sense of belonging and stability. You now have a place you can truly call home for years to come.
Despite some of the amazing pros of purchasing a home, there are a few downsides to ponder. The most glaring drawback: it’s expensive. Let’s face it—buying a home costs a ton of money. Between closing costs, home inspections, and possible repairs, it can become egregious. It’s also a considerable amount of money upfront—a typical down payment is around 20% of the home’s cost. For example, if you are attempting to secure a home that costs $200,000, that would require a $40,000 down payment.
Another downside—when you own a home, repairs are solely your responsibility. From a new roof to broken air conditioning, there is an exorbitant number of things to be taken care of. Some things like fire, wind, or hail are covered by homeowner’s insurance. On a case by case basis, water damage is sometimes covered. However, the cost of home repairs can add up quickly and rapidly deplete your bank account.
Lastly, there is always potential to lose money if your home value declines. The environment, amenities, seasons, and maintenance are determinants of your home’s value. Bad schools, poor roads, or neighbors who neglect their property’s appearance are all factors that could drastically decrease the value of your home.
There are copious benefits when it comes to renting, like extreme flexibility. If you needed to quit your job, pack up, and move across the country, it’s more manageable to get out of a lease agreement than sell your home. Even if you wanted to move across the city, you have the freedom to do so, practically hassle-free.
Renting can also be significantly more affordable. It requires fewer upfront costs, aside from a security deposit, which is a fraction of what you’d spend on a down payment for a home. You also forego property taxes, which saves a notable chunk of money. You’re also not responsible for maintenance or repairs. All of those combined make your monthly payments more predictable—you’re not scrambling at the last minute for unforeseen costs.
While there are advantages when it comes to renting, like anything, there are also downfalls. One downside: your landlord can raise the rent, which could potentially cost you more in the long-run, compared to a fixed-rate mortgage. Factoring in the spiraling cost of rent is a tremendous thing to consider—according to CNBC, rents are rising at the fastest pace in two years. There are also no tax benefits, and there is no ability to establish equity. Various restrictions also apply when it comes to upgrades—most landlords won’t permit you to paint walls, install new appliances, or remodel. There is limited freedom on what you can change.
Deciding to purchase or rent a home is an enormous decision, and it’s not cut and dry either. There are various factors to think about when you’re questioning if you should continue renting or choose to make the big leap and acquire your own home. It’s critical to think about how long you want to stay in your home, how much money you have for unforeseen expenses, as well as if you’re carrying any debt. At the end of the day, it’s about you, your needs, and what works best for your lifestyle.