Renting vs. Buying a Home: This Is Exactly How To Decide Which Is Best For You
Figuring out whether to rent or to buy property is a big and important decision. Each of these options has its own set of advantages and disadvantages. Before you decide which option to choose, you have to take some time to evaluate both the pros and cons.
The decision might affect your lifestyle. For instance, if you decide to buy property instead of renting it, you won’t be able to spend as much as you did before. It requires saving a substantial amount of money, so it will affect your everyday expenses. On the other hand, you will only spend money once, unlike renting, which you need to pay each time. Plus, a lot of people see it as a good investment.
As for renting a property, it has its own advantages. For instance, the taxes you need to pay won’t be hugely affected. And this is an affordable option too. A lot of people want to wait, so they could afford a house in a certain neighborhood instead of buying a cheaper one somewhere where it is less comfortable. But overall, when people rent for too long, they spend much more money than those who have already bought their own house.
This article aims to help you make a decision. To get started, ask yourself questions related to your potential purchase. Here, they’re addressed accordingly to shed some light on whatever queries you have about the subject, including the benefits and the drawbacks of each option.
Table of Contents
How To Make A Decision
Before you start evaluating and considering the pros and cons of buying or renting the house, answer these questions:
- How much can you spend?
- What is your goal – having stability, or being able to afford changes?
- Are you planning on staying for good in the city?
- Your financial situation, is everything OK?
- Is affording the maintenance of your purchased home (including repairs and design changes if any) something you could do?
It is one of the common questions most people ask – what is your budget. Whenever you decide to spend on something, ask yourself what is the sum you can spend. In this case, you can calculate how much you already have and how much you need to save. Calculate how much money each month you have to save and whether you can afford that. If not, perhaps, renting will be a better option. If you are ready, you might want to start saving.
As for the goal, do you want to have some stability in life? If you have a job in a city you live in and it’s unlikely that you’ll be moving because you’re focused on your career, you might need a home. If you have a family with kids, it might be also more reasonable to spend only once on a house. Naturally, families with children incur higher expenses, so you might prefer to allot more money for your kids rather than to constantly pay the rent.
As for how long you are planning to stay, the question of whether you have a stable career or not comes into the picture. Are you sure you won’t have a better option in another city? You’re not open to any changes in your life? If the answer is “no”, you might consider buying land. If you are not sure, you could still be better off by just paying rent.
Purchasing a house is a big deal. What is the current situation with your career? Is it stable? What about your family? Can you afford to purchase a house? And what about other house expenses? Can you afford the maintenance? Answer these questions as well.
If your financial situation is stable, then it would be more logical to buy a property. If you do the math, the money you have spent on renting all these years is probably already equivalent to the sum you need for your own place. If your current finances are OK and you can put aside money each month to grow your savings, then it’s better to buy a house.
Purchase vs Rent
There are some differences you need to consider. Apart from the amount of money you spend, you should think about some other things.
When you buy a house, you build equity. Over some time, your house might increase in value. You can buy it at a lower cost and later sell at a higher price to purchase a bigger property. The good news is that borrowing money is easier than ever at this moment. So instead of overspending on renting, you might even gain more by buying land.
The maintenance and replacements of broken things are included in the cost of the rent. So if you rent property, you don’t have to be worried about a broken washing machine or other equipment. That is something an owner should be thinking about. If the house is yours, everything is at your expense.
Make sure you can afford such expenses. If you are determined to buy your own home, then keep in mind one important thing – make sure you carefully examine a house you are about to buy. If it has some flaws and might need repair soon, the price should be lowered. Or there could be better options.
Before the purchase, try to figure out whether you can deduct the mortgage. This might be extremely helpful in terms of saving some money. But you should be careful, this option is not always available.
Free to Move Out
If you are thinking about changing your job, or you are not sure whether you will stay in your current city, you should consider renting. If your financial situation is not stable, the best way not to get in trouble is to postpone your decision about buying a home.
For and Against House Purchase
Now let’s see what the fors and against of having your own home are. Here are some advantages:
- It’s an investment – you can always sell it if you need money. And don’t forget about building equity. Over time, your house will increase in price.
- Stability – you won’t be relying on the landlord. You won’t have to suffer from increased rent costs and you won’t have headaches while seeking a place to rent, etc.
- Tax benefits – you might have some perks. For example, if you could deduct the mortgage, you won’t have to pay that much. But only if it is possible as there’s eligibility for such benefits.
- The privacy – renters don’t have that much privacy, and they can’t make some decisions without consulting the landlord.
- You can do what you prefer. You might want to change something in your apartment, and you won’t have to ask anyone’s approval on those changes.
And here are some disadvantages:
- The cost is high – if you don’t have the required sum of money, you will have to borrow it. The closing costs on mortgage vary from 2 to 5 percent from the overall price. Plus there are some taxes you should pay.
- Less flexible than when you are renting. If you want to move out, it will be a problem.
- You won’t be able to sell your house fast. Typically, it takes time to sell a house so you will still be paying the mortgage costs until you find a buyer.
These are just some of the advantages and disadvantages of purchasing a home. Consider them before making a final decision.
For and Against Renting
Even though it seems that renting property is easier and less stressful, this option has some disadvantages. But let’s start with the pros:
- You won’t lose flexibility. You are moving to another city? Changing your job? You won’t have to worry about anything since you can simply rent a house in another city.
- You don’t have to pay for any repairs. It is the responsibility of your landlord. The cost of the repairs of broken items is included in the cost of the rent, so there are no additional expenses.
- Rent costs are lower. It depends on the area you live in and on some other factors. Nonetheless, you can rent an apartment or even a house at a reasonable price. Although in some areas the rent costs are so high that it makes more sense to purchase a house.
And now some disadvantages:
- No changes – even if you badly want them. If you want to expand a backyard, or to buy a deck, etc., you won’t be able to do any of those. It is not your property so you’re not allowed to change anything. You would need permission even for cosmetic improvements and there’s no guarantee that the landlord would approve.
- You are spending, but not building equity.
- The rent price might increase.
- You don’t gain any credit score improvements.
To Sum Up
You should consider several factors before you decide to buy a property. You need to know exactly how much you can afford and whether you can pay for other related expenses. This way, you can save to accumulate a sum of money that’s enough to settle the initial payment. If you can afford that, then certainly it will be better to buy a house.