Whether or not to buy a home is one of the biggest decisions you’ll make in your life. If you aren’t quite ready to make that leap, renting a home can seem like an attractive alternative, but there are a few things to consider before getting started. In this post, we’ll explore the pros and cons of renting vs buying a home to help you make an informed decision that aligns with your future aspirations.
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What to Know About Renting vs Buying
Renting a home can be a great option for those who aren’t yet ready to go all in with buying. Here’s what to consider before renting vs buying a home.
Pro: Flexibility and Mobility When Renting vs Buying
One of the major advantages of renting vs buying a home is the flexibility it offers. Renters are not tied down to a specific location for an extended period of time, making it easier to relocate. This can be especially beneficial for young professionals and others whose life circumstances may change quickly.
Renters can typically choose lease terms that fit their needs, whether it’s month-to-month, yearly, or somewhere in between. That way, they can more easily plan their living arrangements around their current life situation without the long-term commitment of homeownership.
Con: No Equity Building
The average rent in the United States is $1,563, and many people, understandably, would rather invest that sort of money into a home of their own. Unlike homeowners, who gradually pay off a mortgage and build equity in their property, renters do not have an asset that appreciates over time.
Pro: Fewer Maintenance Responsibilities When Renting vs Buying
When considering buying a home, you don’t just need to consider the upfront costs. You also need to think about the long-term maintenance costs, such as roof repairs and electrical upgrades. As a renter, you don’t have to deal with any of that––the landlord is responsible for the upkeep of the property.
Con: Limited Control Over the Property
While you don’t have to worry about maintaining the home, you’re going to be limited in terms of personalizing or modifying the space. Any sort of major changes, such as painting the walls or installing new fixtures, require the landlord’s approval. This lack of control can make it difficult for renters to truly make the space their own.
Renting can also be problematic for people with pets. Only about half of rental housing is pet-friendly, with 9% of those units allowing companion animals without any major limitations on size or type. This is something to keep in mind if you’re a pet owner.
Is Buying the Right Choice For You?
Buying, like renting, comes with its share of pros and cons. If you’re thinking about buying a home, here are some things to consider.
Pro: Building Equity
As a homeowner, you have the opportunity to build equity over time. By paying down your mortgage, you gradually increase your stake in the property, which can appreciate in value. This is a powerful financial asset, providing stability and wealth-building potential.
Con: High Upfront Costs and Financial Commitment
You may or may not be surprised to learn that the median US home price is $412,300. With housing costs rising significantly over the past several years, there are more barriers than ever to first-time home ownership. Aside from the upfront costs, which include the down payment and closing costs, you can anticipate ongoing expenses like property taxes, homeowners’ insurance, and maintenance.
Pro: Freedom and Control Over the Property
Homeownership offers unparalleled control and freedom over the property. Unlike renting vs buying, a homeowner can make changes to their home without needing approval from a landlord. This means you can renovate, redecorate, and make improvements to suit your tastes and lifestyle. With this level of control, you can truly make your house a home. For example, you can expand the living space or install custom features.
Con: Risk of Market Fluctuations
Although real estate generally appreciates over time, property values can also decrease––sometimes by a lot. Economic downturns and changes in the local housing market can all lead to a drop in home value. For homeowners, this means that their investment is not guaranteed and could result in financial loss if they need to sell during a downturn.
This is why it’s important to time the market before selling your house. While you may be tempted to sell during periods of inflation, consider that you’ll really only be able to make a profit if there’s also a demand for housing during that time.
Renting vs Buying: That is the Question
The decision between renting vs buying a home can be difficult. While there is no easy answer, you can find the option that best fits your needs and lifestyle by considering these pros and cons. By carefully weighing each choice and considering your long-term goals, you can improve your financial situation and, hopefully, save money.
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