Renting vs. buying a home is a debate that we often find ourselves engaging in. While whether to rent or buy a home depends on some prevailing conditions, it is important you evaluate the two sides before reaching a decision. The reality is that home rentals and home buying come with advantages and disadvantages. In this post, we are going to evaluate what it means to rent or to buy a home. Let us start with home rentals.
Home renting has continued to gain popularity across the US. For a majority of people moving to urban centers in search of job opportunities or better healthcare, renting is usually the first thing in their mind.
Consider that in the case of a jobseeker, most of these persons are fresh graduates from the universities or colleges, and so they do not have enough savings to afford the cost of buying a new home.
Home rentals come with various advantages. In the following section, we evaluate the advantages of renting a home:
1. Greater Flexibility
Renting a property provides the renters greater flexibility. Consider that one can adjust the size of the house according to the current conditions, and this does not involve too much hassle. In addition, with home renting, you can relocate easily without having to worry about selling a property or financing the process of buying a new home.
2. Does not Involve Lump sum Investment
To rent a home, you just need the monthly rent and security deposit. The other costs are often negligible and could include the cost of transport, the cost of searching for a rental home, and other minor costs. The lower costs make renting the first option for a majority of people moving to the cities in search of a job. Consider most of them may not have enough savings to afford a new home.
3. Down payment Can be Invested elsewhere
In some instances, one has enough money to pay for the down payment. However, they still cannot qualify for home buying mortgage, simply because they lack a credit history. Under such a circumstance, you may opt to use the amount in some other projects, establish good credit so that you can purchase a property when you qualify for a mortgage and can afford the repayments.
4. The landlord is Liable for Property Maintenance Cost and Repairs
The cost of maintaining a property could be hectic for some people, hence prefer renting to buying a property.
There are shortcomings associated with home rentals. Consider that when renting a property, you do not own the property; you are just entitled to live in the house for the short lease period. Thus, you are paying someone else’s mortgage.
Buying a home could be by borrowing a mortgage, or paying cash from your savings. Regardless of the approach, if you have paid the full amount, you become the new property owner.
Here are the advantages of Homeownership
1. Builds Asset Base
Buying a property comes with entitlement rights! After you have paid the down payment and you have the ownership title in your name, you can count the property while counting your other assets. This is unlike when you choose to rent a home.
2. Comes with Sense of Belonging
For a family, nothing feels comfortable than a sense of belonging. When you have finally paid the full amount on a property and it is in your name, your family feels proud and increases the stability. However, living in a rental home comes with uncertainty as you do not know what the proprietor wants to do with the property at a later date.
3. Enjoy Tax Benefits
Mortgage borrowers enjoy interest deduction. This is often one of the biggest incentives given by the government to promote homeownership. Other benefits could include waivers to cover mortgage insurance premiums, or real estate taxes.
4. Emotional Benefits
Home buying also comes with emotional benefits. Consider that most people believe that buying a home has changed their emotional well being for the better. For a majority of first-time home buyers, they say they cannot wish to go back to home rentals.
Therefore, buying a home could be considered a better decision than renting a property. However, this depends on what you consider. We can say that buying a home comes with huge financial commitments at the start. This includes paying a down payment, the costs of processing a mortgage, and mortgage insurance. Other costs associated with homeownership include home insurance, the cost of property maintenance, residents association fee, and other costs. The renters are exempted from such costs.
However, while renting a home could mean fewer costs, in the end, you cannot recover the amount you have paid as rent. This is the reason why homeownership is considered the American dream.