Housing is one of the important decisions we have to make in life. For a majority of first time owners, home rentals vs. buying a home are the popular decisions to make. Buying vs. renting a home, which of the two offers more benefits to first-time homeowners? To answer this question, it is necessary we evaluate the pros and cons associated with either of the two.
Owning a home is one of the biggest financial decisions in life. For millions of Americans, homeownership is a dream come true. Here are some of the benefits you will enjoy if you choose to buy a home.
- A House is a Long-Term Investment
Buying a home translates to investing in an asset for yourself rather than for the rentals proprietor or the property management company. Ideally, even where the value of the structure may depreciate over time, the value of the land in which the property sits will appreciate. In that regard, owning a home is considered a better investment.
- Home Ownership Creates a Chance to Build Equity
The chance to build equity is one of the significant benefits of choosing homeownership as opposed to home rentals. Ideally, equity from owning a home is the difference between the market value of your property and the mortgage balance. Therefore, if your property is increasing in value, your equity keeps growing. This is the reason why many Americans consider homeownership to be the best approach for increasing their net worth.
- Homebuyers Enjoy Federal Tax Benefits
Did you know that mortgage interest is deductible from your federal tax due? This is by the virtue that mortgage interest is classified under the same class as home equity loans, property taxes, and closing costs when buying a house. Therefore, the first time homebuyers who itemize tax deductions can reduce their taxable income by deducting the interest that they pay on the home mortgage. On the other side, home rentals do not provide a comparable opportunity.
- Homeownership Means Greater Freedom
Homeowners get a chance to renovate the property to their liking. This is unlike renting a home where you cannot make any additions to the house.
However, the benefits of owning a home do not come without costs. Here are some limitations you will have to cope with if you choose to buy a home.
- Involves a High Upfront cost
Compared to renting a home, buying a home requires a high upfront cost in the form of closing costs, down payment, and numerous fees associated with mortgage processing. Recovering these costs can take many years, and this is often seen as the main barrier to owning a home.
- Comes with Less Mobility
For homeowners, moving from one city to another is not as easy, as it is for those who prefer to stick into rent cycles. Thus, in case of a more attractive job offering, it is not easy for the homeowners to pack and leave.
- Property Maintenance
Homeowners have to pay for property maintenance, unlike renting a home where property maintenance is the responsibility of the property owner. For renters, all they need to do is writing to the property owner or the property maintenance company so that they can have the issues fixed.
- There is no Guarantee Property Value Will Keep Rising
In 2008, the nationwide housing crisis caused the value of properties to fall. This was a big loss for homeowners looking to sell their properties. the structure will depreciate over time, especially where you are struggling to pay for its maintenance.
Therefore, if you are intending to purchase a home, you are informed of the pros and the cons to expect. However, homeownership is not for everybody. Some people will prefer paying monthly rent as opposed to purchasing a home. Here are some advantages that come with home rentals.
- Low Initial Cost
Compared to buying a home, rentals require a lower initial cost. This is in the form of a property deposit and the cost of moving. The initial cost is lower, compared to closing costs and paying a property down payment.
- Property Maintenance is Not a Tenant’s Responsibility
The tenant will not have to make any arrangements to have the property repaired. The property management company will handle the responsibility on behalf of the tenants.
- Monthly Rent May be Lower
The monthly rent is lower compared to mortgage repayments. Thus, if you cannot afford mortgage repayments right now, renting a home is the cheaper alternative.
Here are some limitations of renting a home.
- You Cannot Renovate the Property
To make any changes to the property, you have to seek the approval of your landlord. Even where you speak to the property owner regarding renovations, he or she may put some restrictions on how far you may go.
- You Aren’t Building Equity
You are paying monthly rent cycles, but this does not translate into building equity. All you are doing is repaying someone’s mortgage and facilitating their equity building.
Comparatively, purchasing a home is a better decision if you are looking to build equity, seeking to have a permanent address, and you want to make a long-term investment.