Renting a House vs Buying A Home

buy vs. rentPurchasing a home is one of the main financial decisions that most adults are called upon to make. The costs of buying are varied and complex and it’s important to consider the pros and cons of renting and buying before making your decision.

Should you buy or rent?

Owning a home is a major commitment. Before you take the plunge, you should research home prices and monthly rents in your area. Both vary based on your geographic area as well as the current real estate market. Owning a home has its advantages and disadvantages, but so too does renting a house. Use online payment calculators to understand your potential mortgage payments. Be sure to factor in costs for property taxes and homeowners’ insurance. Explore local rent prices to ascertain how far your dollar will go in the current rental market.

Here we will explore some of the pros and cons of home ownership vs. rental so that you can decide for yourself.

Advantages of buying a home

The main benefits of owning a home include:

  • Building equity. After making your monthly payments you will have equity built up that will either enable you to purchase a bigger home or provide financial security in your older years once the loan is paid in full.
  • Tax deductions. Both your property taxes and the mortgage interest you’ve paid during the year are tax-deductible. Additionally, if you work from home you can potentially use tax deductions to offset your business costs.
  • Creative license. Once you own a home, it is yours to do with as you wish. It’s up to you make changes to the look and feel of the home, whether that that means putting a few nails in the walls, knocking down a wall to open up your space, or even adding onto your home.
  • Consistent payments. If you have a fixed loan, your payments will remain the same throughout the life of the loan. If you choose an adjustable or variable rate loan, your payments are subject to change but the terms of those changes are clearly spelled out in your loan agreement.

The disadvantages of buying a house

  • Major financial commitment. You will need to come up with money for the down payment as well as fees for the various agencies that will help with your purchase such as the escrow company, appraisers, and inspectors. Loans are usually granted on a 15-year or 30-year basis, which means you are committing to make that monthly mortgage payment for a long time.
  • Maintenance costs. Once you purchase a home, there is no landlord to call when the washing machine breaks down or your kitchen sink springs a leak. You are the landlord and will be tasked with fixing these problems or hiring someone to do so for you. These costs and their accompanying headache can add up.
  • Value fluctuation. Based on the housing market in your area, the value of your home can increase or decrease over time. If you are ready to sell the home, that may prove difficult if the house is now worth less than you paid for it.

The advantages of renting

  • Flexibility. Renting a house may require an initial or ongoing lease, but it is a lot easier to get out of a rental vs. getting out of a house you own. Renting can also give you a chance to explore a new area before committing long-term to a new home.
  • Freedom. If you’re not sure how long you might stay in a given area, you are better off renting to allow you the freedom to move more often since you have not committed to one place for a 15-year or 30-year term.
  • No maintenance expenses. If you are renting a home and a major appliance breaks or your find a structural problem with the home, you can pick up the phone and call the landlord to come fix the problem. The landlord will incur all expenses.
  • Credit issues. If your credit score is less than stellar, you can spend time renting a house to build up your credit by making your payments in full and on time.

The disadvantages of renting 

  • Creative limitations. There are very few changes you can make to the house without getting express permission from your landlord. You are limited in your options and pretty much have to keep the place as-is to avoid causing problems.
  • Unstable payments. Rents are subject to increase at the landlord’s discretion. As the market changes and your landlord experiences increases in maintenance costs, homeowners’ insurance and property taxes, he is likely to pass along those costs to you in the way of a rent increase.
  • Empty-handed. When the time comes to leave your rental, the most you can expect to receive is the return of your initial deposit. You have accrued no equity and pretty much finish where you started.
  • No tax breaks. Home renters do not see the same tax advantages as homeowners do.

The choice of any of these depends on your market, where you decide to live and whether you would like to do some home improvements and renovations in your new home. For professional help regarding this important decision, feel free to contact Villa Properties.