One of the most important decisions you’ll make is where you choose to live. Not only do you need to pick the right destination, but you must decide whether you want to rent or buy your home.
Whether you decide to rent or purchase a home depends on several factors. For many households, money is the deciding factor.
Purchasing a home naturally costs much more money upfront than renting, with many individuals and families spending several years saving money to afford a home.
The cost of buying versus renting is one consideration, but it is not the only factor. Some considerations are based on personal preferences, while others are more dependent on the housing market.
There is no right answer on whether it is better to buy or rent. If you are having trouble reaching a decision, consider the pros and cons of renting versus buying to help reach a decision on which is best for you.
Flexibility and Freedom
At first, it may seem like owning a house has more benefits than renting, but this is not always the case.
A popular benefit of renting a home is how much flexibility and freedom it provides. Because it is such an expensive purchase, when you buy a home, you are typically committed to living in it for the next several years.
Even if you are intending to flip the house after purchasing it, the process usually takes many months.
When you are renting a home, you have much more freedom regarding where you live. Renters are often bound by a lease, but many leases have clauses that allow you to leave early.
Many leases last for a year, but if you know you are not going to be staying long, you can attempt to negotiate for a shorter lease. It is not uncommon for landlords to offer six-month lease variants instead.
Flexibility can also make it easier to settle down. If you are unable to find your dream home, you may be stuck waiting until the market changes.
With renting, you can temporarily settle down someplace while you wait for more possibilities. In most locations, there are naturally more rental locations to choose from, since whether houses go for sale greatly changes depending on the state of the market.
In most cases, renting is also less competitive than buying, so you have even more flexibility where you stay. If you are not ready to settle down, renting is often the right option.
The rental process is also much quicker than buying, which makes it easier to change locations as needed. Buying a home often takes several weeks of searching to find the right house.
You also must go through lengthy credit checks and negotiations to find a lender. Closing on a home can also take additional time, especially if you negotiate for the seller to make any repairs or changes beforehand.
Another consideration when it comes to buying or renting a home is responsibility.
When you rent a home, you are generally not responsible for any maintenance costs. Your landlord cannot usually charge you for these repairs and is required to perform any necessary upkeep to make the home livable.
When you own your home, you are responsible for covering all the repair costs, which often cost several thousand dollars. You must also perform the repairs yourself or hire someone, which costs even more money.
However, the lack of responsibility comes with some downsides.
When you rent property, you cannot usually make any changes to the home without first getting approval from the landlord. There may also be additional rules you have to follow.
For example, some apartments limit how late guests can visit or what parking is available. Pets may also not be allowed in rental property. If they are, there are typically extra fees or a greater security deposit you must pay.
There is no denying buying a house is significantly more expensive than renting. In 2022, the average cost for buying a home was between $300,000 and $350,000. This may change depending on the size and quality of the house.
Even if you are buying a fixer upper, you can expect to pay around $100,000 to $150,000. There are also various closing fees and taxes associated with owning a home. Not all the housing costs must be paid up front, with most costs coming from a monthly mortgage.
Renting is less expensive up front, but you do not have as much to show for your property. When you own a home, you are always building equity because your house is your property.
Some rental units allow you to rent with the option to buy, but this is only available through select property. Many renters feel like all the money they spend on rent is ultimately wasted when they are finally able to purchase a home.
Rent is also subject to change and can increase, while your mortgage usually remains a static amount.
Owning a home also opens some additional financial options. Once you pay your home off, you can use it as collateral. This allows you to take out significantly larger loans.
However, there are only a few situations where this is applicable, such as if you are trying to start your own business. Even if you are not using it as leverage, owning your own home shows monetary responsibility, which makes you appear safer to lenders.
Finally, there are some tax benefits only available to homeowners. The exact benefits vary depending on the state you live in, as well as whether it is your first home.
Another advantage to owning a home is stability.
When you rent a property, you only have as much protection as your lease allows. Not only can your landlord raise your rent, but he or she may decide to get rid of the property.
Legally, your landlord must provide you adequate warning, but this does not leave you with much time to find a new place.
When you purchase a home, you are only bound by state laws. Owning a home can also provide greater peace of mind and satisfaction compared to renting property.