The big American dream is having a home of your own. To realize it, you need a large amount of money as it is a big investment. The decision whether to buy or rent a home largely depends on your budget and where you are in your stage of life. If you want to settle down, like getting married or planning to start a family, then you may want to take plunge and buy a home. Keep in mind you also have to have down payment to purchase a home. However, if you are on the move frequently then a rented place is a better option. The decision is a complex one and many factors come into play. Which option suits you, will depend on your unique circumstances.
The smart move for aspiring homebuyers will be to evaluate the pros and cons of both options, keeping in view your financial situation, career goals, and personal preferences. The following are things to consider to help you make the best decision to either buy or rent a home.
When buying a new home, you will have to have some sort of down payment – ideally 20% to save money. That is a lot of money you will have to have saved up.
When you are renting, your downpayment, or upfront costs are much lower. Usually they require first and last monthly payment as well as a security deposit. This a much less than a downpayment on a house.
Having a home, condo or apartment of your own is a big achievement. Everyone wants to own a place to put down roots and have a sense of stability.
A rented house offers flexibility and less responsibility. If you want a temporary place to live this option will be more suitable as it allows you to move in and out of a place with ease.
Home buyers need to take care of all the ongoing costs of maintenance as well as mortgage payments.
Renting means you do not have to take care of any maintenance or repair costs. Many places will even take care of mowing and snow removal. If you own your home, you are responsible for it.
Being an owner of your place you can renovate it the way you want and whenever it suits you. Renovating to your hearts content to make the place your own.
Being a tenant you do not have the freedom to change things about your apartment that you don’t like. So you might have to keep those dreary boring off white walls and ugly light fixtures.
Buying a home will demand a lot of paperwork and a decent amount of time to secure the right home and the best mortgage. It could take many months just to find the right one.
Renting will require less paper work. You could easily be in a newly rented place within a few weeks. Since it’s not permanent you could always move when the lease is up if you need to move or you don’t love your space.
It’s likely that your house value appreciates over time. It will build you equity and be an asset for you. Once you have paid off your mortgage, there is no housing cost just taxes and maintenance. When you pay the mortgage of your house, each step will bring you closer towards owning the place.
A rented place will not build you any equity, but at the same time you will not have to worry about property depreciation. The cost of rent of a place may increase each year and you will always have to bear this expense. Additionally, when you pay your rent, the money is gone for good and there are no returns.
Having a house means enjoying possible tax benefits. You can usually deduct all or some of your mortgage interest when you file your taxes.
With a rented house or apartment, you don’t enjoy tax benefits like mortgage tax deductions, but then you also do not have to worry about property tax.
If you are the homeowner you do not have any landlord to answer to and you are the one in control. Therefore you usually know what to expect when it comes to your home.
When you are staying at a rented place you may face unpredictable changes such as a sudden rent increase. Also, your landlord can decide to sell or make changes at any time, causing unnecessary inconvenience.
When buying a house you have the luxury of choice to get the one that best fits your needs. You do not have to make substantial compromises.
When renting you may have limited choices and will have to do with whatever is available. Be prepared to make compromises.
To own a home is a long term commitment. Because it could take months to find a new home and sell your home, you usually just can’t get up and go. Not to mention, it will usually cost you in the long run if you didn’t stay in your home long enough. The way mortgages are structured you pay more interest off than the principal so you don’t usually end up building a ton of equity.
With a rented house or apartment you have more freedom. You do not have to make long term plans. If you are going through life changes like a job change, or handling a personal problem like a divorce or financial crisis, then it makes sense to go for a rented home or apartment.
In the end, it all boils down to which option better suits you. Life circumstances are not the same for everyone and the decision making factor is not necessarily dependent on finances. It is also about your lifestyle, family, career goals and at which stage in life you are in. . Do not feel pushed to buy a place just because people tell you it is the smart thing to do. The point is to take control of your money, consider your personal situation and do what is right for you and you will find the perfect place for you!