Trying to decide if you should or shouldn’t buy a home? That’s a huge decision, so it’s critical you do it for the right reasons. Not everyone should buy a home. In fact, there are some great reasons to not buy, even if you can afford it.
Whether you should rent or buy depends on many factors, including your income and what you want in life, right now. We’re going to go over the pros and cons of renting and owning to deepen your understanding of each.
There’s a bias in the United States toward homeownership. After all, a house with a picket fence where you can raise a family is part of the American Dream. We have gigantic stores dedicated to home improvement. However, this particular dream isn’t for everyone, and you may be better off renting a home.
The pros of renting may be more numerous than you realize. First, you are free to move at the end of your lease, and most leases are month-to-month. As long as you’re friendly, keep your place clean, pay your rent on time, and don’t make too much noise, chances are your landlord will be happy to have you there. In any case, you’re not tied down to one place for years, so if you get a job offer across the country, or simply want to move elsewhere, you can give notice and head out.
Renters don’t have to pay for home repairs that occur due to normal wear and tear. Yes, if your child flooded the bathroom and that caused water damage to the floor, you’ll be asked to cover the expense, but if the faucet is leaky or the AC unit is acting up, the landlord has to fix it. In many areas, you’ll pay less per month for your rent than an owner would pay on a mortgage. If you want, you can invest the extra money. Who needs equity when you can make smart stock choices?
Yes, there are cons to renting as well. If your landlord decides to sell the property, you may be forced to move. You can also see rental increases, and they may go high enough that you can no longer afford to live there. As a renter, you don’t build equity. While equity isn’t always all it’s cracked up to be (more on that shortly), it can be significant.
If you can’t afford to buy, don’t want the responsibility of homeownership, or if you need the flexibility of being able to move when you want to, then renting is a great choice.
Owning a home is a dream for many. Does it make sense for you?
Let’s start with the pros of buying. Whether you’re interested in a full house or a condo, it’s yours, and you get a lot of freedom to do what you want with it. Want to add a deck in the backyard, or build a wall down the middle of a large bedroom, making it two rooms? You can do that.
If you’re confident you’ll stay in the area for many years, maybe the rest of your life, buying is a great option. When you own your home, you can be confident that your kids will get to grow up in the same neighborhood. You can feel comfortable establishing yourself there.
One major pro of buying a home is that you can build equity. That means that as long as the value of your home goes up, you have money tucked away. You may buy a home for $200,000, and ten years later, sell it for $350,000. Move somewhere more affordable, and you might be able to buy a new place outright.
Get a fixed-rate mortgage, and your payments will never go up (though your taxes might).
The cons of buying can surprise new owners. They include having to make and pay for repairs. These can arise suddenly and be expensive. You’ll also have to pay for trash pickup, pest control, tree trimming, and much more.
For years, the bulk of your mortgage payments will be to the interest. You can get back about $0.25 on your taxes for ever $1 in mortgage interest you pay. That may not sound great, but there’s no such deduction for renters.
Homes can lose value, often due to unpredictable circumstances. Perhaps a major employer in your area shuts down, or a construction company comes in and builds thousands of new homes. Such things can lower the market value of your home, causing you to lose equity.
Finally, if someday you want to move, you have to go through the long process of selling your home. This can take months, even once you find a buyer. Because of this, you’re not free to move on short notice. Also, depending on where you live, it can take a long time indeed to find someone interested in your home.
We hope this clears up some of the confusion around renting versus buying. Just make the choice that will serve you and your family best.