Renting vs. Owning
Making a decision between renting a home and buying one is not easy. After all, not only does it affect the amount of money you are going to have left at the end of each month but also the size of your savings in the long run. Of course, your lifestyle will be affected by your decision, too.
Due to the upfront costs that are associated with buying a home, a lot of young people start their adult lives renting apartments or condos. They build their careers, save money in the bank, start families, and then many of them choose to finally buy a home. On the contrary, some homeowners who are reaching or about to reach retirement choose to sell their homes and become renters again.
Are you a current renter who is interested in buying a home? Or are you a homeowner who wants to know if renting makes more sense? To help you decide, let’s evaluate the relative benefits and drawbacks of being a homeowner versus being a renter.
Costs of Buying and Owning a Home
Buying a home comes with a number of upfront costs – some paid after the seller accepts your offer and others are settled at closing. You need to prepare the down payment, home appraisal costs, home inspection costs, property taxes, insurance, and other closing costs.
Aside from these upfront costs, there are also recurring costs involved in homeownership. These include loan payments, homeowner insurance, utilities, property taxes, private mortgage insurance, and maintenance. There may also be some less-predictable costs that you have to take care of at irregular intervals, like costs of new furnishing, moving, repair, home improvement, and others.
Costs of Renting
While renting does not involve the same costly purchase process as buying a home does, there are a few upfront expenses that renters need to prepare for. You may be asked to settle these costs before or right after you move into a new condo or apartment: security deposit, first month’s rent, non- refundable deposits, and of course, moving costs. There are recurring costs that renters need to be ready for. Of course, there is the monthly rent, utilities, renter’s insurance, and more. If you have a pet, the landlord may also charge you with pet rent to cover any pet-related wear and tear during the tenant’s stay.
Advantages of Buying a Home
– Homeowners build equity over time.
– There are tax benefits exclusive to homeowners.
– Homeowners can turn their home into an investment property and rent it out.
– Homeowners have more creative freedom.
– Homeowners do enjoy a sense of belonging.
Disadvantages of Buying a Home
– There’s a risk of financial loss.
– Homeowners are responsible for their home’s maintenance.
– Most properties are not sold furnished.
– There are the above-mentioned upfront fees to worry about.
Advantages of Renting
– Tenants are not responsible for maintenance and repair costs whether it’s an electrical,plumbing, or structural problem.
– Relocating is easier and less costly for renters.
– Renters don’t have to worry about real estate market trends.
– Credit Requirements are generally less strict for renters.
– There may be some utilities included in the rent
Disadvantages of Renting
– No matter how long a tenant lives in a rental unit, he or she can’t build equity.
– There are no homeowner-exclusive tax benefits to enjoy.
– Tenants have limited control over housing costs
– There’s limited housing security
These are just some considerations for you to make before you decide whether you’re going to rent or buy. After all, this is a personal decision, and there are many subjective and non-financial factors that could affect your decision. But make sure that you really put some thought into it before you make a final decision.
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