Deciding whether to buy or rent a home is a decision that affects your lifestyle and your financial situation. Some people might say that home buying is the better choice. They say you’re making an investment in a property instead of “throwing money away” on rent every month. This opinion can’t stand as a hard and fast rule because every situation is different. In some cases, buying might be more beneficial, and in others, renting is the best choice financially and circumstantially.
We’re here to give you some insight into the debate and help you understand the various pros and cons of buying versus renting a home. Our goal is to help you make an informed decision going forward in your home quest.
The Pros of Renting
On the one hand, renting doesn’t provide you with the same stability as house owning does, but it does give you flexibility. If you want to pick up and move, you can. You don’t have to worry about selling or a house inspection. You have lots more mobility freedom as a renter.
If you choose to rent, you also benefit from more financial stability. While some people believe that renting throws money away instead of investing it, as a renter you don’t have to worry about unexpected home costs or repairs. Monthly rent is always the same. Unexpected maintenance costs and repairs is your landlord’s responsibility. While your landlord might not get repairs done as quickly as you would like, at the end of the day, it’s not you or your wallet that has to deal with leaky plumbing or a dripping roof. You just need to deal with the inconvenience until the issue is fixed.
The pros that come with renting include more financial stability, predictability, less upfront financial stress (no taxes or maintenance and no down-payment), and flexibility.
The Cons of Renting
Although one of the pros of renting is the predictable monthly payments, that doesn’t mean that your rent fee will stay the same in the long run. Every time your lease runs out, your landlord could increase the price of rent (unless your place is rent-controlled). If you live in a desirable part of town, increases in rent could rise dramatically. You could feel like you’re “throwing money away” because you aren’t investing in your own property. As a renter, you have no wealth creation. You also don’t qualify for potential homeowner tax benefits. While you have more flexibility to move, your living situation is less stable. You could be forced to move on short notice if the owner suddenly sells the building.
As a renter, you are also subject to more restrictions than if you owned your own home. Such rules could include no pets or no remodeling. In this case, your lifestyle is not free to choose itself but is subject to your rental contract.
The Pros of Buying a Home
One of the best aspects of purchasing your own home is that you are making an investment. Yes, you have to pay more money up front for a down-payment, but every payment is building equity and going towards your mortgage. Rent payments just go to the landlord. If you get a fixed rate mortgage, you will benefit from predictable payments, but as a homeowner, you are subject to other costs which rack up expenses. Such costs include fluctuating property taxes and insurance. However, you may be eligible for tax deductions, and you are investing in forced savings.
Purchasing a home is a lifestyle choice. Unlike a renter, you can make your own rules. You can decorate to your heart’s content and have as many pets as you want. There’s no threat that you might have to relocate at any moment. Home ownership is a big financial investment, but you have the freedom to create a permanent residence and a stable place to raise a family.
The Cons of Purchasing a Home
As a general rule, the overall costs of owning a home exceed the total cost of renting. While monthly mortgage payments may be comparable to monthly rent, as a home owner, you’ll be spending money on hidden expenses and yearly maintenance and/or unexpected repairs. Check out How to Budget for Home Maintenance and Repairs in Port Alberni and The Unexpected Costs When Buying a Home to learn more about the financial responsibilities of a homeowner.
Potential homeowners also need to take into account mortgage interest, which can rack up to thousands of dollars. For example, if you borrow $100,000 at 4% for 30 years, with monthly payments at $477.42, it will take you approximately 13 years before more of your payment goes toward principal than interest. The good news is that you may be eligible to tax deductions, but in this example, total interest payments could total around $71,000.
Home buyers also need to consider the fluctuating housing market. Your home investment could lose value due to a number of different circumstances, such as a housing increase or a neighborhood decline.
To Own or to Rent? A General Rule
For some people, the cost and responsibility of buying and maintaining a home might be not in their best financial interests. The “rent vs. buy rule of 15” can help you make a general calculation to see what’s best for you. The idea is that if the annual rent for a home is less than 1/15th of a comparable home’s market value, you should consider renting instead of buying. Learn more about the Rule of 15 in this informative article about buying versus renting a home.
Buying Versus Renting a Home? The Conclusion
The decision to buy or to rent can be an emotional and lifestyle choice just as much as it is a financial one. Do you value having your weekends and evenings free or travel frequently? Then perhaps the commitment of home maintenance is something that would hinder your ideal lifestyle. Or perhaps you desire structure and stability? You visualize your ideal home in the certain way and want to have the freedom to decorate and live free of constraining rules? Then renting may not be the best match for your optimal way of life.
No hard or fast rule can be made on the subject of buying versus renting. It depends on your circumstances and how you resonate with the pros and cons of each option. We hope this information can help you make an informed decision going forward in your search for a home, whether owned or rented.