Renting vs Buying a House
Choosing between renting vs. buying a home is a crucial decision that needs to be handled seriously. It influences your lifestyle, the amount of money you save over time, and the amount you would have at the end of each month.
We see a number of people buying homes every day despite the fact that there is an option to rent. They see buying a home as both a significant investment and a place where they can establish roots. However, other people like renting due to its flexibility and minimal responsibility requirements. This makes renting vs. buying a hot topic in the real estate industry.
Owning a home is typically preferred over renting since it benefits many businesses, including realtors, home improvement shops, and mortgage lenders, not to mention the marketing hype surrounding home ownership. Renting is more convenient than owning, but neither is cumulatively better than owning. At this point, you are probably asking yourself, should I rent or buy a house? To get the answer, you must weigh the advantages and disadvantages of renting vs. buying a house. Let’s discuss the pros and cons of each option.
Pros of Renting:
1. It is Less Expensive Upfront
In most cases, when renting a house, you don’t have to make a down payment. You only pay a security deposit which is equal to one month’s rent. The deposit will be returned to you if you don’t damage the house.
2. It Offers More Flexibility
Renting a house is pretty much flexible. You can easily do it if you want to move to another city, state, or country. That’s because breaking a lease is way easier than selling a house. Besides, renting would be a better option if you are not planning to settle in a place for a long time.
3. There are Fewer Risks Involved
When it comes to renting vs. buying a house, renting a house poses fewer risks compared to buying a house. For instance, you must consider the location and amenities when purchasing a house. What’s more, home values can fluctuate. But when renting a home, you don’t have to worry about this because you are only there temporarily.
4. No Property Taxes
When it comes to renting vs. buying, renters are typically exempted from paying property taxes. These property taxes can be pretty significant depending on the state. When you rent a house, you don’t have to worry about paying these hefty property taxes.
Pros of Buying:
1. Build Equity
One of the significant benefits of buying a home is that it allows you to build equity. As you continue to pay off your mortgage and your home value increases, you will be able to gain equity in the house. That means you can easily borrow against equity and get cash to do other things. Here is free home valuation to know the value of your home
2. Customize Your Home
Another significant benefit of buying a house is that you can always customize your home to suit your taste and preference. You cannot easily enjoy this benefit when you rent because most landlords don’t allow renters to alter the house’s look.
3. Tax Benefits
Homeowners are usually eligible for tax deductions on property taxes, paid interest, and home improvements when filing yearly taxes.
4. Supplemental Income
Homeowners are also capable of creating an additional income stream when owning their own house. By renting out your property, you gain the freedom to pay for your own mortgage and have additional revenue throughout the year. It also provides you with more of the freedom that renting offers.
Cons of Buying:
1. Higher Down Payment
When you buy your home through a mortgage, you’ll have to make a sizable down payment, which is usually 20% of the property’s value. The down payment makes you have equity in the home, and it typically increases as you pay down your mortgage. However, in today’s market, it is much more common to see a 3-5% down payment which is typically between $11,000-$25,000 depending on the price of the home. This makes it much more doable and only a little further away from the security deposits of renting
2. Less Flexibility
One of the significant downsides of buying a home is that it offers less flexibility. It is so hard to relocate to another place. You have to hire a real estate agent to help you list and sell your home, which can take time, especially if you don’t find a buyer quickly. However, the money returned is worth the wait if you bought wisely and are in a good market when selling.
3. Maintenance is on You
Is it better to rent or buy a home? Well, when you rent, your landlord will take care of all maintenance requirements. But if you are a homeowner, you will be responsible for the money and time required for maintenance.
4. Home value could decrease
One of the homeowner’s worst nightmares is their property losing value. When you are a homeowner, you have to be ready for this because there are times when your home can decrease in value due to various factors.
Cons of Renting:
1. Unable to Enjoy Tax Deductions
As a renter, you are not eligible for a tax deduction on paid interests or property taxes, unlike homeowners who qualify for tax deductions.
2. No Equity
Monthly rent payments involve money not being invested in long-term security or building up savings. Even though buying a home seems quite risky, especially with the house’s value, homeowners can take steps to increase the value of their homes and property. But as a renter, even if you decide to make changes to improve the property’s value, it will only benefit your landlord.
3. Your Rent May Grow Every Year
Another downside of renting is that your monthly rent is more likely to grow yearly. This can make you dig deeper into your pockets.
4. You May Not be Allowed to have Pets
Some rentals do not allow tenants to have pets. So if you love pets, you may have to think twice when planning to rent. What’s more, if your rental allows pets, it will be more difficult and expensive to have pets, especially those rentals that charge tenants an extra fee.
How to Know if Renting or Buying is Right For You?
Should I rent or buy a house? Well, deciding whether to rent or buy can be a tricky one. It all depends on one’s personal choice and preference. However, if you are the type of person that wants to secure your future today and offer yourself freedom tomorrow, then buying a home is one of the best personal investments you can make. If you need to move every 2 years or less, then renting is more feasible. Or, if you are moving in and out of a bad market quickly, then renting is a good option. Other than these reasons, buying a home offers you more flexibility than renting due to the financial gain when selling, the ability to rent out your home as supplemental income, the tax benefits you get every year, and the long term advantage of building equity that you could retire on.