Pros and Cons of Renting vs. Buying

Pros and Cons of Renting vs. Buying

The advice given to new families for many years has always been to rent while you find a job, save up your money for a downpayment, and then, when you can afford it, buy a house. Financial advisors stated that it didn’t make sense to rent long-term because you had nothing to show for it in the end. 

It’s a very simplistic viewpoint, and while this used to be true to a degree, no doubt in part due to low housing costs and longer employment terms, the situation has changed thanks to the housing crash in 2008, which we still feel to some degree today. 

Now, the pros and cons of renting or buying have to be weighed separately and compared with lifestyle and plans for the future. Each path has distinct disadvantages and advantages that the potential renter or buyer should consider before deciding. 

Buying a House

Purchasing a home is costly. It requires saving up for a down payment, entering into a mortgage, and choosing to stay in one place for a set number of years. It comes with property taxes, home repair bills, and renovation costs. 

With those costs, comes the decision to stay in one area for an extended period. Your home purchase will often be at a fixed, monthly mortgage payment for upwards of 10 years. 

The house and property, however, become an investment that can be left to your children or sold later in life. Knowing where you will be living can help to encourage loyalty to the area, community involvement, and engagement with local politics.

This stability can make long-term budgeting and life decisions more manageable. However, you will be at the whims of the market regarding property taxes and interest rates, either of which can suddenly increase, and unlike renting, you will be responsible for paying. 

Provided there isn’t another crash, buying a home is forced savings where you pay into your home every month or risk being homeless, and in exchange, you build equity and receive the house as an asset when you’re mortgage free. 

For people who have trouble saving, this can be an easy way to put money away for the future.

One of the most significant benefits is the independence that comes with homeownership. It can mean that you can have the pets you like, fence in your yard for your children, and upgrade or remodel your home to your dream design. 

Owning your own home is built on a balance of independence, decision-making and responsibility that appeals to some and isn’t worth the hassle for others.

Advantages

  • Fixed monthly mortgage payments
  • The house is an investment for the future
  • Freedom to express your style in your home
  • You are choosing your family, whether that includes pets, children, or roommates.

Disadvantages

  • Down payments, property taxes, and costs associated with buying a property 
  • Fees associated with homeowners associations (HOA), if applicable
  • Maintenance and repair responsibility
  • Decision fatigue, choosing a home and area to remain in can be difficult. 

Renting a Home

Millennials are the largest groups of renters, vastly outnumbering boomers and even Gen-X homeowners and many say they won’t be buying a home anytime soon.

This trend of renting doesn’t appear to be changing either, as a recent trend has been encouraging people to forgo buying a home, citing rising housing costs and plateauing wages. Instead, many have said they will remain as renters while investing their money in more lucrative investment options.   

With the proper discipline, it’s a valid option, and if a person’s career requires them to stay mobile or if they haven’t chosen the area they wish to settle down in, then buying a home doesn’t make sense. Renting allows for a degree of freedom with traditional rental contracts lasting 6-12 months compared to a 10-year mortgage. 

Buying a home has a degree of tradition with it, and sometimes the need to buy a home is brought on because that is what is expected of a family when they reach a certain point in their lives. 

Renting also doesn’t have as much stigma attached to it as it once did. It doesn’t have to mean a small bachelor apartment, as more investors purchase large townhouses and then rent them. For a person with high-interest debt or who is in the process of repairing their credit score, renting is a way to save money to afford a downpayment for a home later on.

If you can find a home to rent in a good area with a good landlord whose rules you can agree with, it can mean a life free of additional, unexpected repair costs and a primarily predictable monthly rent with annual or biannual raises.

Advantages

  • No responsibility for the cost of home repairs and property maintenance 
  • No property taxes
  • Ability to invest extra income on more desirable assets
  • Perfect for a mobile lifestyle

Disadvantages

  • While restrictions exist in some areas regarding how often rent can be increased, monthly payments can rise over time, and the cost of renting can skyrocket.
  • Lack of ability to customization living spaces
  • Limitations on the number of pets and types of pets, additional fees may be levied.
  • Disagreements with landlords can mean needing to move with little notice.

The Wrap Up

The pros and cons of renting vs. buying a house or property boil down to lifestyle choices and financial decisions; no one option is the best one for everyone. 

In areas with high housing costs, renting may be the only option available for most until prices come down. Perhaps purchasing a home outside of the city and commuting is an option, or renting and investing in other options is a good compromise.

The freedom to change and upgrade their own home may be worth settling down into an area for years and may encourage them to get involved with their local community while they’re at it. 

Renting isn’t throwing your money away if it suits your lifestyle or it’s a step towards future homeownership. Be sure to be informed and understand all the pros and cons before you decide either way.

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