Many people wonder if it is better to rent a home or purchase a home. There are many things to consider when making that choice. Factors include age, stress level and your overall investment outlook. The costs that are associated with buying a home can be more complicated than simply renting a home.
Renting Pros and Cons
When it comes to renting, there are some advantages. When something goes wrong in a rental home and needs repair, there is no maintenance required by you as the tenant. You just, call the landlord. If you aren’t ready to put roots down and stay in one place long, renting is the better option with various lease terms. Switching to a month-to-month lease will make it simple to relocate for whatever reason.
Then there’s value. Even though home prices have begun to stabilize, there’s no guarantee that a home will increase in value over time. With renting, you will not have to be concerned about owning a depreciating asset.
However, it’s not all roses and sunshine if you choose renting over home buying. There are issues many renters run into over time. Rents in many areas across the U.S. have been steadily increasing, and you could face a rent increase as soon as your rental agreement is over. Renting doesn’t allow you to build equity, and you also do not receive any tax benefits that would come with the payment of interest on mortgage payments. Renting essentially means that you are using someone else’s home. That may limit or eliminate your ability to paint or remodel. Some landlords allow you to paint but then still require approval on color choices.
Homeownership Pros and Cons
Homeownership might not be for everyone, but there are some advantages that are quite motivating. Along with building equity and receiving tax breaks on mortgage interest, you can enjoy the security of knowing that your house payments will stay stable. Fixed-rate mortgages provide homebuyers with principal and interest payments that remain the same for the entirety of the loan. Owning a home gives you the opportunity to put roots down and become a part of a community. You can get to know your neighbors or maybe join a homeowners’ association. Your home may become a long-term investment over time, whether you decide to rent it out, or sell it once the value increases.
With all of those perks, you may have already decided on purchasing. However, there are some downsides to consider. When renting, you generally only have to come up with a security deposit and first and last months rent, however, with home buying you will need to save for a down payment along with the closing costs. As a homeowner, you are going to have to pay for your own repairs and maintenance. These expenses can become costly over time, so plan on setting funds aside for those unexpected expenses. Along with paying the interest and mortgage on your new home, you will have to budget for property taxes. These taxes can fluctuate, unlike the fixed payments. Depending on how much they fluctuate, you could struggle to afford your home. Homeowners insurance is mandatory as long as you have a mortgage. Rental insurance is optional in most states. These costs will raise your monthly payment as well.
Whether you choose to rent or buy your next home, its important to weigh your options. Look over your finances carefully and prepare a monthly budget to find out what you can comfortably afford. Don’t overextend yourself financially. Just remember that both renting and buying have advantages and disadvantages and you are the only one that can make the right choice for you.