Finding the perfect place to call home is one of the most exciting parts of life. However, there is the question of whether you should rent or buy a property, and the answer is not a simple one; it all depends.
Many people assume that it is always advantageous to buy a home, and don’t really consider renting. Here, we will outline the pros and cons to both, so that you can make the best decision for your situation!
1. More fixed costs for the term of the lease
Your monthly rental payments may include utilities, cable, Internet, and other amenities. This will make it simpler for you to budget since those bills won’t vary during the span of your lease.
2. No maintenance required
If anything in the house breaks down, all you have to do is call the landlord and he’ll deal with it for you. So easy!
3. Flexibility in moving from place to place
If you have career that demands that you move from place to place quite often or you may need to relocate in the future, it is much easier to switch a month-to-month lease or sublet your rental than it is to sell your house.
4. Living in a nicer location
As a tenant, there is the possibility of living in an area in which you could not afford to buy a property in.
5. Can be more affordable in the short-term
A smaller amount of cash is required initially, compared to a down payment needed for buying a house. Additionally, this will leave you with more free capital to invest elsewhere. This may even go towards buying a future home.
1. Bound by rules of the lease
As a tenant, you do not have the freedom to renovate or make and changes to the property. Your home is supposed to be yours and you may want to alter a few things that make you feel more at home. While some landlords are kind enough to let you paint your apartment, you’ll have to get their permission and consult on the color. If you want to make other changes or upgrade an appliance you’ll have to put in a request with your landlord or apartment manager.
2. Monthly payments can increase
Rents may rise and once your current lease ends, your monthly payment may increase.
3. No return of investment
When you rent, your housing payment provides you with a place to live, but will not provide you with an asset to sell when you are ready to move. Additionally, there are no tax benefits. Your landlord gets any and all tax breaks available. Tenants cannot deduct any of their housing expenses.
1. Do as you please
You do not have the restrictions of a landlord. You have the flexibility to have pets, a garden, make noise, and more. You are also able to tailor your home to your liking. It’s yours! Really do what you want to make yourself at home.
2. Settle into a community
Committing to owning a home will mean that you will be more involved in that community. You’ll be able to get to know your neighbours and build relationships at community projects. You will be able to get to settle into some place more permanently called home.
3. Use your home as an investment
If you decide to move out of your home, you can always rent it out rather than sell. This will generate income, which can go towards the home loan. There also is also the potential for your home to appreciate in value, at which point you may choose to sell it and make a profit.
4. Build equity
Home equity is the value of ownership built up in a home that represents the current market value of the house less the remaining mortgage payments. Therefore, this builds up over time as you pay off the mortgage and the market value of the property appreciates.
5. Tax benefits
You can deduct mortgage interest payments and property taxes from your federal income tax when you own a home. Consult legal or accounting advice for details as these deductions can offset the cost of your housing.
1. Responsibilities of ownership
As a homeowner, you will be responsible for the safety of the building and any repair that is required. This may include a faulty pipe, a broken appliance, and the list goes on. These are additional expenses and you must budget for these.
2. Additional and variable costs
While house payments may be stable with a fixed rate mortgage rate, the costs for utilities, maintenance and other amenities vary. There are also additional costs such as insurance and property taxes. These need to be taken into consideration as they may make your home less affordable for living.
3. Less mobility
If there is ever a situation where you need to move (such as a job relocation), the home must generally be sold. Selling your home takes time and you may not be able to sell it quickly enough or for the value that you want.
4. Possibility of negative equity
While you can build equity, there is also the possibility of negative equity. If you are not able to keep up with mortgage repayments, you may be left with negative equity or the threat of repossession.
5. Home can lose value
Homes don’t always appreciate in value. There is a risk of having to sell at the wrong time and you may make a loss.
6. Buying a home requires a large cash investment
You need to save funds to go towards a down payment, closing costs and other expenses of homeownership. This ties up a lot of your capital that could be used instead for other investments.
Consider how long you expect to live at this place, what the costs of buying may be, what your future plans are, and if you have the ability to afford it. Buying a home is a major decision and when faced with this decision you should consider the pros and cons of both renting and buying.