In this competitive market, many prospective homebuyers are considering alternatives to buying—like renting. Deciding to rent or buy a home can be a challenge. There is no one-size-fits-all approach, as the deciding factors for each person and family are completely different. And as with anything, there is a trade-off for every decision. Here are some factors to consider when deciding whether to buy or rent your home.
Renting vs. Buying a Home
Renting a home means you can move without penalty at the end of your lease. When renting a home, you are at the mercy of the property owner or landlord. In contrast, when you own your home, you’ll likely have a monthly mortgage payment, but you will be able to make decisions regarding the property since you own it. There are both advantages and disadvantages to owning and renting a home. Let’s examine them below:
The Pros of Renting
Maybe you’ve heard people say that renting a home is like “throwing money away.” People say this because you pay your landlord or property owner rather than build your equity when you rent. While this is true, renting can still be an investment in your future. There are some clear advantages to renting a home:
One advantage is that you’ll have a relatively fixed budget: you will know exactly what your monthly expenses are. For those without much flexibility, this can help balance your budget.
As a home renter, you may not be responsible for the costs to repair faulty appliances or other fixes needed throughout the home. Many leases will indicate that this is solely the responsibility of the landlord. In contrast, when you own a home, expenses can add up quickly. While some problems will be quick and inexpensive fixes, other expenses, like a leaking roof or failed HVAC unit, can quickly become costly. As a homeowner, these responsibilities are all yours, while as a renter, you are not responsible.
Another advantage of renting a home is that it gives you the flexibility to travel and change home locations rather than being tied down to one location.
The Cons of Renting
One disadvantage of renting a home is that you are at the mercy of your landlord. If they decide to stop renting out the house or sell it, you are forced to vacate. They are also allowed to increase the rent at each consecutive lease renewal. With inflation hitting all areas of the market, this is something to be prepared for when renting.
In some cases, monthly rent payments exceed what people would pay for monthly mortgage payments in comparable homes—this is why it’s crucial to do plenty of research on your local market and weigh out all of your options before you make a decision.
As mentioned earlier, renting also means you are not building up an investment or ownership over time. Your rental is no more yours years down the road than when you first started renting. This allows flexibility that is attractive for people who don’t want to be tied down to the property—for example, people saving up for their dream home—but if you’re looking for a house to make your own, you may want to consider buying.
The Pros of Buying
Instead of renting, you won’t experience rate spikes if you buy your home and have a fixed-rate mortgage. Another advantage of owning a home is building equity by making your payments. When you make a mortgage payment, you invest in your property and work toward a future where you will own your home and no longer have to make payments.
Owning a home provides more flexibility than renting in personalization and design. Many landlords prohibit painting the walls or making changes to the space. Even landscaping can be off the table. When you own your home, you will customize it to fit your unique style and needs. In most cases, you’ll get more space, too.
The Cons of Buying
Unlike renting, you are tied to your location when buying your home. For some, this is the entire point; however, if you like or need to relocate often, this may be too large of a commitment. In addition, you will be required to pay more expenses as a homeowner, such as property taxes, trash pickup, water/sewer, repairs and maintenance, landscaping and pest control, homeowners insurance, and other similar home expenses. Depending on the location of the home, you may also have homeowners association (HOA) fees. You will also likely have interest on your mortgage payments.
The Bottom Line
As with any major life decision, your choice to rent or buy should depend on your personal preferences and goals. And, of course, it will ultimately come down to your finances and your local market conditions. Research, research, research! You may think something makes more financial sense based on your assumptions on buying versus renting, but until you’ve done the research and truly tested out all options, you won’t know!
Best of luck on your house hunting journey!