Renting Versus Buying Your Next Home

Renting Versus Buying Your Next Home
by Mady Dahlstrom
Photos Joanne Pio | April 23, 2015
Wondering if you should buy a home or write another check to your landlord? Consider this first.
Buying a home is a major life decision. If you find yourself weighing the option of renting versus buying, it’s important that you have all of the facts straight before making the big purchase.

How do you know buying a home is better for you than renting? Which one is the more cost-effective choice? Renting versus buying a home comes down to what is best for you personally, based on your lifestyle and economic situation.

There are many factors that can make buying better than renting or renting better than buying. When deciding what’s best for you, consider your age, stability, and income. 
When deciding whether renting or buying is best for you, consider your age, stability, and income. 
Here are just a few reasons why you should rent, and then a few reasons why you should buy, to help you decide which is better for you.

WHY YOU SHOULD RENT

A Safe Bet

Buying your first home can be intimidating.

If you’ve been out of college for multiple years and have a stable career, you may feel pressure to buy a home just because it’s the “grown-up thing to do”. According to the National Association of Realtors, the average age of a first-time homebuyer is 31 years old—right around the time most people feel more pressure to “grow up”.

But don’t rush into a big decision like buying a home just because society says you should. Renting is the safer bet for many people, as it gives you time to build up your income.
Don’t rush into a big decision like buying a home just because society says you should.

Mobility & Flexibility

Have you just graduated from college and are unsure where you want to call home? Do you have any uncertainty about your current job and income?

Renting a home gives you greater mobility and flexibility for changing your career path and moving cities. In other words, with renting you don’t have to make a long-term commitment, which can be ideal when you’re still growing your career.

No Maintenance Expenses

While you may not be able to fully claim the home as yours, renting means you always have a helper on hand. When you buy a home, all of the maintenance costs are on you.

From a burst pipe to mowing your lawn, home ownership comes with a lot of responsibilities. And these costs can add up!

Renting a home means no property taxes, property insurance, or homeowner association fees. Also, when something goes wrong in your rental, you call the landlord instead of heading to the closest Lowe’s or calling a handyman

Build Credit

Having good credit when buying a home can make a big difference in whether or not you snag the home of your dreams.

If you’re young and just starting to build credit, renting may be the best option. This will give you time to pay your rent on time and build the good credit that you will need to qualify for a mortgage or a loan.

No Investment

The commitment of buying a home can create a lot of stress on potential homeowners. Because buying a home is a major life decision (that costs major bucks), some younger adults may find they’re not ready to make the investment quite yet.

Renting a home requires little to no investment as you are in a lease that usually only requires you to commit for one year.

If your location, your employment, or your relationship are in limbo (or have the potential to be), renting may make more sense for you now than a long-term investment.

WHY YOU SHOULD BUY

Stability

Have you been married for over a year? Are you looking for a permanent place to reside and call home for more than five years?

Buying a home can offer stability, security, and a sense of being grounded. You aren’t at the whim of a landlord and you can be comforted by the fact that you’re invested in your home and committed to living there for a long while.
Buying a home can offer stability, security, and a sense of being grounded.
If that sounds like what you want right now, then buying a home is the right choice.

Control

Renting a home comes with rules, abiding by your lease, and dealing with a landlord.

One big perk of buying a home is that you have freedom and creative control. You have control over the color of the walls, the appliances, or any remodeling projects you want to do.

Your pride of ownership, independence, and freedom to decorate, are all forms of control that come with buying a home.

Good Investment

The financial investment of buying a home can weigh heavy on the shoulders of potential homebuyers, but just because an investment may not be right for others, doesn’t mean it’s not right for you.

Depending on your geographic location, homeownership can be a better financial deal than renting, as rental costs can be higher than mortgage payments in different cities.

Owning a home means you don’t have to deal with the inflation of rental costs by your landlord, and homeowners have tax benefits with mortgage deduction and deductible property tax depending on your location.

Buying a home is a financial investment that if done right, can result in an appreciation in value. And if you plan on buying a home and living in that home for the long-term, chances are you will be able to sell it for a profit in the future.

Equity

When you own a home, your ownership goes up with each payment to your mortgage, as opposed to making a payment toward a rental, which goes directly into your landlord’s bank account. 

Equity is the value of a property that you actually own. If you have a fixed-rate mortgage, the price you pay to own your home is not going to change, as the interest rate remains the same through the term of the loan

Buying a home can come with large upfront costs, but over time those who buy a home can increase their net worth through mortgages and payments faster than those who rent. Owning a piece of real estate can allow you to build equity and also give you the opportunity to build wealth.

* * *

Deciding whether to buy or rent a home is both a financial and a personal decision. Compare buying versus renting costs in your city—from initial and recurring costs, to net proceeds (money you receive after a sale or at the end of a lease) to help make those tough choices.

While buying or renting a home may seem more of an economic decision, remember that half the choice will come down to your personal lifestyle. Homeownership has been considered the “American Dream” throughout history, as it has traditionally represented financial stability and freedom. But more recently, renting has seemed to be the more freeing option, as it doesn’t tie you down in one place or saddle you with a mortgage for the next 30 years.

Choosing whether to rent or to buy is affected by (but is not limited to) the market, where you choose to live, whether or not you like maintenance tasks, your income, age, and level of stability.

Before you make this major life decision, make sure you look at all the pros and cons that go along with buying or renting a home and make the choice that’s right for you.

Have you made a decision about buying versus renting? What were your reasons? 
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