Should you rent or buy a home?
Some of the Pros and Cons of renting vs buying a home are listed below.
- Flexibility to move around
Having flexibility is one of the top considerations to make when you’re deciding whether to rent vs. buy. Renting allows for more mobility to change jobs and travel without being tied down by homeownership responsibilities and costs. Rental lease agreements come in shorter terms if you know you won’t be in a city for more than a few months, or you can lock in a longer term of one or two years.
If you buy a home and decide soon after to move, you could lose money on your purchase if you haven’t stayed long enough to recoup the initial costs. And, depending on market conditions, your home may not sell quickly or for as much as you paid for it. Before buying a home, ask yourself how long you plan to live there. If it’s less than a few years, renting may be the better option — both financially and logistically.
- Landlord is typically responsible for maintenance, repairs
- Monthly housing expenses are stable and fixed
- Monthly rent payments build your landlords’ equity (not yours)
- Rents can go up over time
- Restrictions on upgrades, decorating
- Landlord may choose to sell the home, requiring you to move on short notice
- Build equity and wealth over time
One of the key benefits homeownership has over renting is the ability to build equity as a wealth asset. Home equity is the current value of your home, less the mortgage balance you owe. You gain home equity over time by paying down your loan principal and when home values increase. You typically need to stay in your home for several years or more to gain a decent amount of equity.
When you rent vs. buy, you get a roof over your head but the payments go toward building your landlord’s equity. In affordable housing markets, it can be less expensive to buy than rent in the long term.
- Freedom to update and customize as you wish
- Reap certain tax advantages
- Monthly housing payments can be higher with property taxes, homeowners insurance, HOA dues and maintenance costs factored in
- Less flexibility to move
- Maintenance and repairs are your sole responsibility
- Could lose money if you sell too soon
- Recent tax law changes limit tax benefits in some high-tax states where home prices are high
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