Renting vs. Buying a Home
The decision to rent or buy a home is an immense one. At one point or another, all adults carefully consider which is the most appropriate option for them and their situation. In the early years, it is common for adults to start their lives in a rental situation. As time progresses, those individuals are able to build their careers and save money. Eventually, there comes a time in everyone’s life where they consider settling down into a home, a serious relationship, and possibly bringing children into the world. When this point is reached, home ownership quickly becomes a hot topic. If you are reading this guide, it is likely that you are at the point in your life where you are trying to determine if it is best to rent a home or buy a home. We will outline the advantages and disadvantages of both to help you come to the best decision possible.
The following outlines a list of advantages associated with renting a home:
- If you elect to rent, you will not be held responsible for the repairs and/or maintenance that is required on the property. The landlord or property manager is responsible. This will save you a lot of time and money. Additionally, it will give you peace of mind.
- Renting allows you to bypass the common fluctuations that are associated with the values of homes.
- If you have low credit score or no credit at all, renting is a viable option as the credit requirements are generally much less strict than those that are required to purchase a home.
- As a renter, you may be able to obtain access to certain utilities as part of your rental agreement. Examples include electricity, gas, and/or cable. The utilities may be added into the cost of your rent each month. This helps you save a little bit of money.
- Finally – as a renter – you have the freedom and flexibility to relocate immediately.
Now that we have outlined a few of the advantages associated with renting, we will outline a few of the disadvantages:
- One of the main problems associated with renting a home is the limited security that stems from such an endeavor. While there are eviction laws in place to protect a tenant, there is no law that allows for a tenant to remain in a home indefinitely.
- When you rent a home, you build absolutely no equity in that home.
- Renting a home does not allow you to deduct any type of expense on federal income taxes. In fact, renting could actually increase your tax-based liability each year.
- As a tenant, you may incur additional expenses such as rent increases.
- When renting, you are expected to purchase rental insurance that will protect any losses and/or injuries that may occur on the property. This could prove to be a hefty expense, depending on where you live.
If you elect to purchase a home, there are many advantages. These include:
- When you pay on the property, that property builds equity. This means that, for every extra dollar you put towards your house payment, you are accumulating equity. Once you reach the 20% mark, you may actually borrow against that equity in order to boost the overall value of the home.
- As a home buyer, you are entitled to many federal tax benefits. These include homestead exemptions, deducting property taxes, and getting a bit of a break on the interest that is paid on the mortgage.
- When you buy the home, you may make changes to the home to boost its appearance, functionality, and value – without obtaining prior approval from a property manager.
- As a home owner, you may transform the structure into a source of income by transforming it into rental property.
- Finally – as a home owner – you may build roots within the community where the home is located. This increases your sense of belonging in a particular area.
Now, let’s evaluate the disadvantages of buying a home:
- As a home owner, you may build equity; however, that does not mean that you are entitled to profits. The value of your home may decrease, over time. This means that you may experience financial-based losses if you sell the property.
- To buy a home, you typically need a down payment and the credit rating to obtain financing. If you are unable to meet the basic criteria, you may not be able to obtain financing. If you are able to obtain financing, it will – likely – be at a very high interest rate.
- When buying a home, you will likely be required to furnish the structure – including the appliances contained within that structure.
- As a home owner, you will be responsible for the maintenance of the home. This includes basis upkeep, homeowner’s dues, and any other property ownership fees.
- When you buy a home, you are also directly responsible for any necessary repairs. This may prove to be exceptionally costly.
There are many advantages and disadvantages associated with both renting and purchasing a home. In order to decide which option is best for you, you must weigh each – very carefully.