Buying a home has often been touted as the “American Dream”. However, home ownership is not always the best option. The answer to which is better, renting vs. buying a home, really depends on the individual or the family. Both options have their pros and cons.
The decision that’s best for you depends on your budget, your lifestyle and whether you’re ready to commit to staying in one place for at least five or six years. Keep reading for tips on weighing the advantages and challenges of each.
Advantages To Owning A Home
- Building Equity – One of the chief advantages to owning a home is that you are, at least theoritically, you are paying off a home that you will eventually own outright. In addition, if the value of your home increases, you’ll be able to cash in on that value when you sell your home. However, since during the first decade or so of a 30-year mortgage, you pay mostly interest, that equity won’t build much until you’ve lived in the home for a while.
- You can make it your own – When you own your home, you can make any changes you want. You can paint your bedroom orange, knock out a wall and plant trees in the yard, all things that your landlord might not be enthusiastic about in you rent.
- Security – Home ownership also offers a degree of security. When you own your home, your landlord can’t decide to sell the building or occupy it himself. You can be assured that, as long as you pay your mortgage, your family will be able to live in the house.
Advantages To Renting A Home
- Flexibility – One of the chief advantages to renting a home is that renting allows you to pick up and move easily, without having to worry about selling your home.
- Your landlord takes care of maintenance and repairs. When you rent, your landlord is responsible for fixing the toilet, mowing the grass and replacing the water heater if it stops working.
- No taxes or insurance – When you own your home, you are liable for property taxes and homeowners insurance. When you rent, the landlord pays those bills. (You will renters insurance, but that is usually much less expensive.)
Challenges To Home Ownership
- Can’t easily move. When you own a home, you have to find a buyer for your home before you can easily move. This can sometimes take months, which can be a problem if you take a job in another city.
- Repairs and maintenance are on you. You are responsible for fixing and maintaining all of the mechanical systems in your home. This can be expensive if your heating system breaks in the middle of winter or your roof starts to leak.
- Requires a down payment. Buying a home requires a 20% down payment. If you pay less upfront, you’ll be required to pay a monthly mortgage insurance premium to protect the lender. Renting usually only requires one or two month’s rent upfront.
Challenges To Renting A Home
- Your money is going to someone else. You won’t build equity when you rent. Your money is going to fund someone else’s “American dream”.
- No control on the price. When you rent, the amount you pay is usually guaranteed for the term of your lease. However, the landlord can, and likely will, raise the rent at the end of the lease period.
- No pets. Many rental properties prohibit pets.
Do What’s Right For You
Deciding whether to buy or rent a home can be tricky and buying isn’t always the wiser choice. Make sure to weigh the pros and cons carefully before you and your family make that move.