Although the typical advice for people is to save up to buy a home, that isn’t the best choice for everyone. It’s true that some people are better off buying because of the investment opportunity. But depending on your current situation, it may not be ideal for your needs.
That’s why an estimated 36% of Americans currently rent. And if you want to decide if you should be one of those people, you’ll need to understand each option and how it applies to your needs.
So the question is, is it better to rent or buy? Keep reading to learn the pros and cons of each option.
Renting a Home
Renting a home is excellent if you don’t want to put down a huge down payment or go into debt. Here are some of the pros and cons of going that route.
Flexibility of Movement
You may not be ready to settle down at the current point in your life. You may like your current location, but there may come a time in the future when you want to make a move. If you own a home, that becomes more complicated.
Rental leases make this easier. You aren’t tied to a location long-term when you rent. You can pack up and move to a new location when your lease is up (or if you pay to break your lease) to head to a new location.
Rent to Buy
It is true that you’re usually building no equity in a home when you rent. But that isn’t the case for all renters. If you decide to rent a house, you may be able to find a rent to own agreement.
In this situation, a portion of your rent payment will go to your down payment for a house. This is a great arrangement if you don’t have the cash for a large payment or want to try a home before you commit to buying.
No Added Expenses
One of the problems with owning a home is you’re responsible for all the repairs. You may have a predictable monthly mortgage payment. But if something goes wrong, you can have a significant expense you didn’t expect.
That doesn’t happen when you rent your home. The landlord has the responsibility to handle those issues. As a result, you’ll have a predictable payment that won’t jump unexpectedly because of home issues.
Less Flexibility in the Home
One of the drawbacks to renting your home is that you have little say in how it looks. You can decorate it as you wish and use whatever furniture you want. But when it comes to bigger projects that change how a home looks, you don’t have options.
Most landlords don’t want tenants to make major changes. This means you’ll have limitations with what you can do with your living space.
Rent Increases
Your rent won’t increase during your current lease. That gives you short-term relief from price increases. However, that may not last forever.
It’s your landlord’s right to increase rent when you renew your lease. This means you can end up paying more for a home down the line.
Buying a Home
Buying a home means getting an asset and building equity over time, so learning the pluses and minuses of home buying is vital. Here are the things to consider when buying a home.
Home Customization
One of the biggest perks of owning a home is making it your own. Outside of an HOA that controls its outward appearance, you can do whatever you want with your home.
You can take on kitchen, bedroom, living room, and bathroom remodeling projects. As long as you follow your local building codes, nobody can tell you no.
Build Equity
One of the good things about a mortgage payment is that each one increases your net worth. Every payment increases your ownership of your property as you pay down what you owe.
As time passes, this will increase even more as your home increases in value. If you ever want to sell in the future, your equity and home value increase will go up, leaving you with more money than what you paid for a home.
Tax Benefits
One of the best parts of owning a home is the tax deductions. If you have mortgage interest and property taxes, you can take them off your yearly tax returns.
This means you can reduce your overall tax burden and get your money back yearly. You can use that money to improve your home or invest in other opportunities.
Unexpected Expenses
Although you get a stable monthly payment with a mortgage, you also have the responsibility of maintaining your home’s health. This means taking care of problems as they occur.
Some of those issues won’t cost much to handle. However, some can cost a lot. You may end up with a large expense that you didn’t expect.
Property Taxes
Your mortgage payment will remain the same when you own a home. However, that won’t be your only home payment. Your state taxes you based on your home’s value.
If it raises in value, that means you pay more.
You can see large increases throughout the years depending on where you live and the laws there. These increases can add unexpected expenses that make it more challenging to live in an area.
Is it Better to Rent or Buy? Now You Know
Finding a new place to live isn’t always easy. You’re bombarded with countless homes on the market and aren’t sure if it’s better to save your money by getting a rental. And to make things more complicated, there isn’t one answer that works for everyone.
Now that you can answer the question, “is it better to rent or buy?” you should be in a better position to make a decision. Remember each option’s pros and cons to determine which is right for your needs.
Do you want to learn more about dealing with the real estate market? Learn more tips about finding your next home on the blog.
