Renting vs. buying a home is one of the most important financial decisions a person can make. At first glance, buying a home can seem like a much better option. If you look deeper, however, you might find unexpected benefits to renting!
Renting a house is most often cheaper than buying a house. Buying a house also makes you responsible for maintenance. Because of maintenance, the price of a bought house can end up even more than its listed price.
Of course, buying a home means that you own a home. That’s no small thing! The amount of money you spend on a home is an investment if it’s the right home. While owning a home can be a money sink, it can also be a safe investment, provided you do enough research beforehand.
Renting vs. buying a home is a question with a lot of depth, and the answer will ultimately depend on your unique financial situation and lifestyle.
Reasons For Renting A House
There are several reasons to rent a house rather than buy. Ask any financial professional or advisor and they will tell you the reasons are apparent. Renting a house is cheaper than buying. Buying a house can often start from $200,000, and prices are probably going to continue to rise.
Renting a house doesn’t come with hidden costs like owning a house does, either. After you pay your security deposit and buy renter’s insurance, the only price tags you have to worry about are rent and utilities. And utilities are frequently covered in part by the landlord!
Less obvious than the financial reasons are reasons arising from your lifestyle. Renting a house offers flexibility, while buying a house locks you in place. If you aren’t sure of where you want to settle down yet, it could be worth renting, even if you could afford a house.
Renting a house allows you to remain liquid and nimble. If you want to have immediate access to your money, renting is the way to go. Likewise, if you can’t afford a major purchase, or you aren’t sure that you’ll want to stay in an area, it is probably worth renting rather than buying.
Reasons For Buying A House
Buying a house is usually a good financial investment. If you can afford the initial down payment, the subsequent mortgage and mortgage insurance payments, you won’t be losing money. Paying off a mortgage can increase your credit score, making it easier to be approved for other purchases in the future. You can also get a fixed-rate mortgage which means that, unlike renters, you never will have to worry about your price increasing.
The main financial reason, however, is the buildup of equity. Equity is what your house is worth on the market, minus how much you have yet to pay on your mortgage. You can pull from your equity to get low-interest loans or a home-equity line of credit that you can use as a credit card. You can even sell your house to upgrade to a more expensive one or downsize to a cheaper one and make money.
Finally, house ownership allows you control over your own home. You can repaint, remodel, and rent out rooms at your leisure. The inflexibility in location can be made up for by the flexibility of choice. When you buy a house, you have the freedom to make that house a home.
What’s Right for You
Only you can know what is best for you. The question of renting vs. buying a home is wholly unique. But you should first make sure that you are financially secure enough to buy a home. If you are, you need to think about whether or not you will want to move in the near future. Finally, think about whether or not you can handle the hidden costs of renting — maintenance, homeowner’s insurance, property taxes, and more.
If you can afford to, and you don’t intend to move anytime soon, buying a home can grow your wealth and provide you with some stability that renting does not. Renting, however, will save you money immediately and provide you with flexibility that homeownership does not. Just like choosing the right home or the right life insurance coverage, it’s up to you to choose what is suitable for your family.