Renting a home is a great idea for people who want to move around a lot or maybe move away from their parents and buy their first place. But eventually, the majority of people will eventually choose to buy a home. But if you’re currently thinking about making a move, what are the pros and cons of renting vs buying a home?
There’s a great deal that goes into this. Part of it will be a person’s perceptions of the pros and cons of renting vs. buying. While they might seem quite different or you might think one is obviously better than the other, the market has a way of equalizing them. Broadly speaking, mortgage rates and affordability reflect the rental market and vice versa. If one gets cheaper than the other, people will simply move, balancing supply and demand.
Pros and Cons of Renting a Home
Let’s start with the pros and cons of renting. On the pro side, we have the fact that renting is a far more flexible option compared to buying a house. It makes it much easier to relocate or change your accommodation in the future. It’s a particularly good option for those who need to move around regularly because of work.
Additionally, you don’t have to take any responsibility for repairs. Landlords will do that for you because they have to ensure the accommodation remains habitable under local laws.
Finally, it costs less to rent upfront than to buy a house. You don’t need an enormous deposit to get started.
Of course, there are some downsides. The biggest is that you don’t build any equity in your home. For many people, this represents “money down the drain.”
You also have to follow the landlords’ rules. For instance, you can’t just start hanging pictures whenever you want, knocking holes in walls. That’s not allowed.
Lastly, you don’t get the financial stability and long-term security you get from owning a property. If you do save, it’s in an external savings account which tempts you to access it all the time.
Pros and Cons of Buying a Home
So, what about buying a home? Well, the benefits are obvious. First, you can get various tax deductions and other forms of assistance. Depending on where you live, there are often government programs that offer deals like first-time homebuyer $15k tax credit and home $25k grant.
You can also benefit from the fact that you actually own the home. No landlord can tell you what to do with it or how you are allowed to modify it. Hanging pictures and paintings is a breeze.
Lastly, it gives you the potential to build massive wealth over the long term. As you pay off more of your mortgage, the amount of equity in your home continues to rise. At the same time, home prices also rise, leading to a virtuous cycle that can potentially set you up for retirement.
But it’s not all good news, of course. Saving for a down payment can be challenging for some people because of the high cost of properties. Homeowners are also responsible for their homes’ upkeep and often have to spend a significant chunk of their income keeping everything in working order.
In conclusion, we hope you have learned a few things from our look at the pros and cons of renting vs buying. When that day comes and you buy a house of your own, you’ll be glad you took the time to make a smart decision rather than jumping right in without thinking.