Advantages and Disadvantages of Owning or Renting
Considering buying a home, but doubting if buying or renting is the right choice for you?
Is buying a house a much better choice than renting?
Think about the following before you sign that buying or renting contract.
Advantages of Renting:
- Fixed Costs for the term of the lease.
- A renter does not have to pay property taxes separately.
- Not gaining equity but not losing either
- When the lease is up you can just move
- There is generally less work in maintaining a home or apartment.
- A smaller amount of “up-front” cash.
- Renters typically aren’t responsible for fixing things when they break. However, renters need to notify landlords when something is wrong and waiting for maintenance to be done can be an issue at times.
Advantages of Owning Your Own Home:
- Over time the mortgage balance decreases and equity builds, even if the value of the home does increase
- The ability to remodel and redecorate the home to match your needs and desires
- There can be tax advantages attached to home ownership. Consult competent legal and/or accounting advice for details for your situation.
- A fixed rate mortgage lets homeowners know exactly what their monthly payments will be for as long as it takes to pay off the house.
Disadvantages or Renting
- No matter what happens with the value of the home you will never gain equity
- Limited or no ability to personalize your living quarters
- No tax advantage to renting- your landlord gets any and all tax breaks that are available.
- Usually, renting requires a deposit equivalent to the first and last month’s rent. While the deposit may be returned to you at the end of your lease, any damages done while renting can cause you to forfeit part or all of the deposit.
Disadvantages of Buying a home
Equity may go up, down or stay steady. When renting landlords can change rental or utility rates at the end of a leasing period.
If you want to move, home generally must be sold. Work needs to be done by you or paid for by you.
Generally, a larger initial investment in the down payment. Things to keep in mind when deciding on buying a home vs renting.
Buying a home mean garnering equity.
Buying a home brings a sense of pride and accomplishment.
Buying a home brings a realization that you are part of a more permanent community in which you might be a contributor to the well-being of others around you.
Financial obligation #1
When owning a home, each monthly payment is like putting money into a savings account rather than giving it to the landlord when renting.
When you own your own home, you run the risk of your water heater breaking down or the roof leaking and paying for it when it does happen.
Homeowners should budget 1-2% of the purchase price of their home for maintenance.
Financial obligation #2
Buying a home is also accompanied by some interesting tax benefits. As a general rule, the down payment on a home is 20% of the purchase value.
For example, if the home is worth $250,000 this is a downpayment of $50,000. To many, this is a huge chunk of money to pay out at one time. At times it takes a while to buy a home to save money on rent.
Responsibilities of Buying a Home vs Renting A Home
As a tenant in a rented home or apartment, you have more freedom to move about the country.
Many small home improvements can add up to big dollars invested in upkeep expenses.
If you find you aren’t exactly thrilled with your new neighborhood, you may find yourself stuck until the value of your home increases enough to get back your initial investment. Can you imagine moving into a new home and having a newborn with next door neighbors that conduct band practice on a daily?
If you are considering to buy a house to save money on a monthly basis please click here to see if you qualify for a loan.