Renting vs. Owning: Is Homeownership Right For You?
You’ve been renting your apartment for a while, and you’re looking to change things up. You’ve been able to afford your rent without any problems, and you’re hoping to make the move into something more permanent. The next logical step is buying a home, right?
This is the line of thinking for many people, and it makes perfect sense on paper. However, there are some major differences between renting and owning, and making the leap into homeownership shouldn’t be done without some serious consideration. Before deciding your next move, there are a handful of things to take into account before determining whether or not homeownership is right for you.
The ability to afford rent doesn’t necessarily translate to being able to afford a home. There are many additional costs to homeownership aside from paying the mortgage, and many of these extra expenses aren’t applicable to people who rent. Some of these added costs include:
- Lawn Care
- Upkeep – Not just paying for the services or tools necessary to upkeep your home, but also accounting for the time it takes to do so.
- Taxes and Fees
- Ongoing maintenance and repairs
This isn’t even taking into account the things you have to spend money on before moving in, like a down payment, inspection fees, and an appraisal.
Pros of Renting
With those additional costs in mind, it’s important to note that there are many pros to renting until you can afford to own a home and everything that comes with it. Aside from not paying for everything listed above, here are a few pros that come with renting:
- Predictability – The cost of rent is (for the most part) fixed, so you aren’t responsible for paying for everything like you would if you owned a house. While this might sound redundant, not only can you save time and money in the long run not having to worry about paying for these things, but you’ll also have the peace of mind that comes with the stability of not fearing having to fund unexpected issues that pop up.
- You aren’t responsible for upkeeping or fixing your space
- Access to additional amenities – Many apartment complexes give you access to additional amenities – gyms, pools, patio areas, etc. – that would cost a premium if you were to pay for them out-of-pocket. The money you would be spending on these services can be put towards buying a home later.
- Flexibility – Many apartment complexes require you to sign a one-year lease up front, and after that, you’re only locked in to living in your complex for a shorter period of time, with some even offering a month-to-month option. This gives you the ability to move around more often as you choose, as renting isn’t as long-term of a commitment as owning a home.
Pros of Owning
While renting may be a better fit for some people, there are definitely pros to owning a home as well. Some of these pros include:
- Stability – While renting offers the flexibility of being able to change locations more frequently, you will still have to find somewhere else to live at the end of your lease should you choose not to renew. Homeownership provides a more secure and permanent place of residence and, for the most part, choosing to change locations is based on your terms, and you aren’t at the mercy of a landlord. A home is YOUR space.
- Freedom – Owning your own space gives you a level of freedom you often can’t have while renting. For instance, many apartments have size or breed restrictions on pets, and these rules don’t need to be adhered to if you own your own home. You can also take more creative liberties on the aesthetic of your home – a leisure that isn’t allowed in most spaces that are rented.
- Increased Equity – There are two ways to gain equity as a homeowner: by raising the value of your home or lowering your mortgage debt. Both of these can take a good amount of time, but if done successfully can give you a major financial asset that can greatly benefit you in the future.
- Forced Savings – As we’ve previously discussed, owning a home costs a lot of money. This forces many homeowners to put money away and develop better financial habits as a result.
- Tax Deductible – Owning a home can provide tax benefits as well. Some tax benefits include becoming eligible for certain tax credits, property tax deduction, and a home office deduction for those who work from home.
Cons of Renting
- Instability – We know this might sound contradictory based on our having predictability as a pro of renting. And while renting is for the most part predictable, renters are also at the mercy of their landlord, who can make the cost of rent can go up or force eviction at any time.
- Little Financial Advantage – Since the space you’re living in while renting is not yours, it’s very difficult to get any sort of return on the money you’re paying to live there. As a renter, you’re not building equity, you don’t get the same tax breaks that come with homeownership, and you won’t make any money when you leave, since it’s not your property.
- It’s Not Yours – This might seem obvious, but by living in a space you don’t own, you have very little room to make it feel like your own. Most rental properties don’t allow you to make cosmetic changes to the property to make it more personalized and have strict rules on pets you can have while living there.
Cons of Owning
- More Responsibility – You own the house and everything that comes with it. For some, this is the perfect scenario, but for others, the thought of being responsible for the upkeep and repair of a home can turn them away from ownership.
- Additional Expenses – Going off the previous point, not only are you in charge of the upkeep of your home, but you also have to pay for all the tools necessary to do so. If you don’t want to do this yourself, you’ll then have to pay for the services of others to do so.
- House Can Lose Value Over Time – Your home’s value can decrease in value over time for a variety of reasons, including higher mortgage rates, natural disasters that decrease property value, poor maintenance, and a decrease in neighborhood quality caused by foreclosures. Owning a home is an investment, and like all investments, there is a chance that you could lose money on it.
- Unpredictability – While the mortgage cost is more stable than rent, other costs can arise unexpectedly since you’re in charge of fixing everything that goes wrong.