No matter where you are in life, one thing remains the same – you need a place to call home. You are going to have to decide whether it’s more financially advantageous to buy a property or to rent one. Both renting and buying have their benefits and potential drawbacks, and this isn’t always an easy decision to make. Here’s a closer look at why people choose one over the other, so you can make a wise and informed decision that fits your financial goals.
Reasons People Choose to Rent
Owning your own home is considered the “American Dream,” but for some people, it might make sense to consider renting instead of owning. The first is monetary; buying a home may require a sizeable down payment and additional funds for closing costs. Renting will usually require a security deposit, which is typically a month’s worth of rent, that the person can get back at the end of the lease. It may cost less at the outset to choose to rent.
Renting may cost less than owning a home in some ways. Typically, home maintenance costs are the most significant way you save when you rent versus buy. For renters, most major home maintenance needs are the responsibility of the landlord, not the home’s occupants. Property tax payments and the property’s insurance are also rolled into your rent costs, and it’s the landlord’s responsibility to pay these, not yours.
Renting also provides more flexibility. If you aren’t sure what the future is going to bring and how long you’re going to need to live in your current area, renting makes it easier to move without financial concerns or the struggle to sell your home. If you know you are only going to be in the area for a few years, then renting might be the best option.
Reasons People Choose to Buy
Of course, there are plenty of good reasons to choose to buy a home. Many people want to buy a home because it’s a long-term investment. While it may cost more at the outset, every month that you make your mortgage payment, you are investing in the value of that home. In contrast, when you pay your rent month to month, the only investment you are making is in your landlord’s financial well-being. Financially, buying a home makes more sense.
Buying a home also puts you in control. If you want to knock out a wall to create an open floor plan or paint the bedroom a vibrant shade of crimson, you can. There is no lease to worry about and no landlord’s opinion to consult. The decisions are all yours.
Finally, buying a home means you can sell when you want. You never have to worry that your landlord is going to decide it’s time to sell before you’re ready to move. The decision making is yours.
Benefits of Buying Your Own Home
While renting provides flexibility, buying your own home carries numerous benefits, including many financial advantages. As a homeowner, you will enjoy:
- Possible tax benefits from writing off interest and property taxes (see your accountant for advice)
- Building equity in your home
- Freedom to make your own decisions about your home
- Investing in a long-term investment that may appreciate with time
- The stability that comes with owning your own home
Whether you choose to rent or buy is a personal decision, but there are clear financial benefits to buying. If you are planning to stay in your area for more than two or three years, want to start investing in your financial future, and are ready to have some stability, then it is an excellent time to embrace the benefits of homeownership.