The PROS of RENTING
Easy To Move On
When you rent a home, you are free to move on as soon as your lease is expired. There’s no house to sell. This is one of the most common reasons for renting a home, rather than buying. If you are unsure of how long you will be living in an area, renting is usually your best option. For some it makes sense to buy a home when you are sure that you want to stay in the home for a few years. This allows you to build equity and make money when you sell, which you cannot do when you rent.
No Property Taxes
For many homeowners, property taxes are the 2nd highest cost of owning a home, next to their mortgage payment. Home owners insurance is a close 3rd for expenses, which is another fee that you do not have to pay when you rent a home…. or do you? I have heard the argument that the cost of property insurance and home owners taxes are enough to make people rent, rather than buy. But think about this, the landlord of the property that you rent is also paying property taxes and insurance. So, who is really paying the property tax and insurance? It just makes sense that the cost of the tax and insurance are being passed on to the tenant. This means that tenants are inadvertently paying the taxes and insurance for their landlord, just not directly. There are also tax advantages to owning a home as well.
No Maintenance
Every home needs maintenance and repairs over time. When you rent the repairs are passed on to the landlord or property management company. This is a very popular reason to rent. Of course, there are down sides to this as well. Some landlords and property management companies are not very prompt or easy to work with. Just do a quick Google search for reviews on property management companies in your area. You may find a long list of tenants who have complained that it took days or weeks to fix issues in their rental properties that should have been fixed immediately, as well as smaller issues that never got fixed at all. However, if you have a good landlord, your maintenance worries are minimal.
The PROS of BUYING
You Can Make It Yours
When you buy a home you are free to paint, change fixtures, tear down walls, or put up new walls. It’s your home and you can do whatever you want with it. When you rent a home you are normally not allowed to change paint colors, fixtures, or remodel. Having the freedom to do what you want with your home is one of the greatest benefits of homeownership. A home is a place that captures many of our memories which is why we want it to reflect us and our design choices.
No Payment Hikes
When you agree to the terms of your mortgage, chances are very high that you will have a fixed rate. This means that your mortgage payment will not increase over the life of the loan. The security of knowing your payment amount will never change is very comforting. It’s common for rental properties to have payment increases every time that the lease is resigned.
Build Equity
When you buy a home a portion of your payment goes straight to paying down your principal balance. Every time you make a payment, you earn equity in your home. As the value of your house appreciates your principal balance goes down and your equity steadily rises. If you buy a home in an area that appreciates well and you pay down your mortgage over 5+ years, you will have a nice chuck of equity to use however you like. You can use your equity to move into a larger home, refinance and take out some cash, or leave it alone and let it grow!
The CONS of RENTING
Increasing Rents
Rents nationwide seem to be rising fast right now. This makes it hard to plan your future finances when you don’t know what your rent payments are going to be after your lease expires. Once a lease expires a landlord can opt to raise the rent... If you disagree to the new terms you’ll need to find a new place to live which is also an expense. The unknown future of rents can make tenants feel insecure and unsettled.
Lease Deadline
When you sign a lease it will most likely have a deadline. Many leases are structured for a year. Once the lease expires there is no certainty that you will be able to renew. Sometimes landlords will sell the rental property after a lease is expired or have family and/or friends move in. The future is always uncertain when you rent a home which makes long term life plans more difficult and uncertain.
No Equity
Every rent payment made goes straight to the land lord. You do not have any ownership or equity in the property. This is the hardest part of renting for most people. Knowing that every dollar of your rent is gone for good is discouraging and causes tenants to look into owning their own home. Rent always costs much more in the long run. Imagine renting for 10 years as opposed to paying down a mortgage over 10 years. The person who pays down their mortgage is going to have a nice chuck of equity when they sell as opposed to the person who rents and has no equity after 10 years.
The CONS of BUYING
Need Money For Down Payment
When you buy a home it’s common for the mortgage company to require you to put a certain amount of money into the deal as a down payment. This is usually between 3% to 5% of the cost of the home. There are down payment assistant programs and other mortgage options for certain borrowers so this is not always a con to owning a home. There are misconceptions that home buyers need as much as 20% down but this is usually not the case. The best way to find out is to talk to a mortgage lender so know your options.
Homeowner Responsibilities
When you own a home it is your responsibility to maintain the property.
THE VERDICT
Both renting and buying have their advantages and disadvantages. It really comes down to the stability of your living situation. If you have a career that is moving forward and you feel like you are going to be in one location for atleast 3 years buying a home makes much more sense. If your life is up in the air and you don’t know what next year is going to be like, renting a home makes a lot more sense. Buying a home costs less in the long run and builds your financial future. Renting a home is expensive and always leaves you without any true ownership or equity.
Taking the time to truly look at all the aspects of each option can help you plan your life to move in the direction that benefits you the most. If you would like to explore the possibility of purchasing a home please contact the Linda & Ryan Lowe Team so we can sit down and discuss your options and also meet with a mortgage lender so you can discuss your financial options.