Almost all adults eventually face the decision between renting and buying at least once in their lifetime, though many go through the process several times. It can be a confusing a difficult decision to make, because both sides offer their own distinct advantages and disadvantages. Today, we will lay out some of the pros and cons of renting and buying to help make it easier for you to figure out which option will better suit your specific situation, wants and needs.
Renting is More Expensive in the Long Run – The New York Times offers a free calculator that allows you to compare the cost of rent to the estimated mortgage and interest rate on a house to see how long it will take for buying to cost less than renting. In most cases, its as short as three to five years. Once you factor in rent increases, tax breaks and other things associated with each option, buying gradually becomes steadily cheaper with each year you own the home.
There is no Equity in Renting – Every time you make a payment toward your mortgage, you are building equity. In the event you decide to sell your home, the more you have paid off the more equity you have, and thus, the more money from the sale you get to keep. In contrast, between damage charges and cleaning fees, many renters actually owe money when they leave their rental properties behind.
Renting Offers no Price Stability – Rent costs rise steadily each year by roughly 5%, meaning that what you pay today to rent will be approximately 25% higher in five years, 50% higher in 10 and so on. If you stay in the same place for 20 years, you will be paying at least twice as much to occupy the same place as you paid when you first moved in. When you buy a house, your mortgage rate will pretty much stay the same for the entire term. Whether it’s 15 years or 30, what you pay today will be almost exactly the same as you will be paying decades from now.
Renting Offers Little Aesthetic Control – From the tile in the kitchen to the color on the walls, renting gives you little-to-no say in how your home looks. Landlords expect the property to look exactly the same the day you move out as it did the day you moved in, and even home improvements aren’t typically allowed. When you own your home, you can do pretty much as you please with it, so long as it complies with any HOA rules and local laws.
Rent Often Costs More and Gives You Less – If you compare the cost of rent to what most people pay for their mortgage, you will find that the mortgage is usually less each month. Most two bedroom apartments cost more to rent than owning a three or four bedroom home.
Buying Ties You Down More Than Renting – If you aren’t sure you want to live in the same place for more than a few years, buying may not seem like a feasible option. If you don’t want to deal with selling a home or staying put until the house is paid off, renting provides more freedom as you can leave as soon as your lease is up. However, many homeowners choose to turn owning a home into an entrepreneurship opportunity, and rent out their homes for profit as an alternative to selling. You could buy your home and move virtually anywhere else in the world you want while collecting rent on your house.
Buying Costs More Upfront (Usually) – Some people choose to rent because they can’t afford or are saving up for a down payment toward a house. Some lenders require as much as 20% of the home value upfront before they will loan the rest. However, it is important to note that LGI Homes offers a no money down option, which can help you buy the home of your dreams for less up front than a security deposit and first and last months’ rent on an apartment.
Buying Requires You to do the Maintenance – When you own your home, there are no maintenance men to call or gardners to do the landscaping, unless you hire them that is. Longtime renters are used to the convenience of having sinks fixed for free and neatly trimmed landscaping that they don’t have to worry about, but when you own, these things are your responsibility. However, if you love yard work and you’re a home improvement saavy person, you may enjoy having the opportunity to do the upkeep on a house you own.