TO RENT OR BUY?
Renting Vs Buying has always been a point of discussion amongst real estate experts. Depending upon the economic situation of the city or state, the debate between buying vs renting keeps fluctuating. But due to the economic crunch in the last few years, the housing prices have stabilized and mortgage rates decreased. On the other hand, many cities have seen a drastic rise in the apartment and home rents and this has discouraged a lot of renters who find it difficult to pay continuously rising rents. Instead of paying a big chunk from their salaries as a rent, they prefer to buy a home and pay monthly mortgage.
There are a number of considerations you must make when making this decision. Renting and buying both present a number of pros and cons, and your own financial situation may be the biggest factor of all.
The thing is no one can give you an estimate about the right time to buy a home. It depends upon a lot of factors including:
- Your Finances
- The city and state you are living in
- The kind of home you want
- The neighborhood you want to live in
Both renting and buying have their pros and cons. You can weigh them to see which situation suits you best. It will eventually help you to determine what’s good for you in the long run.
Pros of Renting a Home
- You don’t need to have a huge amount of money to pay for down payment or insurance or closing costs etc. You can invest that money somewhere else.
- There is no maintenance cost because it is paid by your property manager or owner
- You can easily move out. For example, if you are renting a big home and you lose your job, you can always move out easily to a new relatively cheaper place. But if you own the house, it would be quite difficult to move out.
- Although the housing market has stabilized recently but if it starts depreciating, you can avoid owning something which will incur loss to you.
- Renting also allows you to make your credit history better. If you have a bad credit history, you would be denied for most of the housing loans but for renting, you don’t need an excellent credit history.
Cons of Renting
- Your rent/monthly payment can fluctuate. Renters don’t have control over that.
- Renting means that you are making monthly payments to the homeowner and using their place to live. It doesn’t help you in building equity.
- You may not be able to paint, decorate or remodel your home the way you like because you don’t own it. There will always be limitation and you will have to seek permission from the owner.
- Being a renter, you can’t receive tax benefits such as deduction on mortgage interest payments or federal income tax.
Pros of Buying a Home
- Buying a home is an American dream and almost everyone wants to have the pride of ownership.
- It helps you to build equity. So, you are paying monthly mortgage payments and interest rates but eventually, they are accumulating in the total amount of the purchase price of your home. You own it and if you will sell it later, you will get something out of it.
- The housing payment will be stable. If you will choose 15-year fixed mortgage, you will have a fix amount of monthly payments. You don’t have to worry about increasing rents.
- Owning a home allows you to settle and take an active part in the community you live. You are there for a long period of time as compared to renting, where you aren’t sure when you might have to leave.
- You can use your home as an investment. If you plan to leave it, you can always rent it out or sell it to generate income.
- You have control on your property. So, if you want to paint or remodel it, you can do it whenever you want to. You don’t need permissions from anyone.
- You can receive multiple tax benefits if you own the property.
Cons of Buying a home
- You will have to do your own maintenance and bear the costs
- You will be paying monthly mortgages and taxes as well
- You will also need to have some cash in hand to pay down payment and closing costs
- In a depreciating market, your home might lose its value
The debate for renting vs. buying goes on. It solely depends upon the client and their situation. It is a fact, in the long run, it is beneficial to own a home. It’s a good investment and it gives you a sense of security too. If you want to make a good decision, apart from financing, please look at the market conditions too and then make up your mind.