Choosing where to live is a big decision. Choosing whether to own a house or to rent one is an even bigger decision with no easy answer. In the United States, a lot of people lean towards home ownership thanks to the popular American dream. However, a lot of people have been debating this for quite some time already, and, the truth is, there is no definite answer to the question of what is better.
When choosing whether to buy or rent, it all comes down to personal preference and what your long-term goals are. Both definitely have their pros and cons. If you’re reading this because you are curious about it, then you’re in luck because I’m here to break it down for you.
Let’s first look at the costs of buying a house. First off, there are the upfront costs. Examples of these are the deposit, legal fees, and survey fees. When you’ve got all that figured out, you then have to consider the mortgage interest and property tax. Next, unlike a renter, you are responsible for the supplementary costs such as water, heating, electricity, and trash collection. Third, you must take into account maintenance costs, especially if you happen to buy a house that is not so modern and requires frequent repairs and renovations. Lastly, home insurance. While it is not legally required to have one, most mortgage lenders will require you to have some basic form of home insurance.
On the other hand, the costs of renting a home are much more simplified. If you are looking to rent a home, expect to pay upfront costs such as the application fee, security deposit, and first and last month’s rent. Then, there’s the gross rent, which is the total amount of rent to be paid excluding utilities and maintenance. Sometimes, these costs are already included in the rent, therefore giving you the net rent. Lastly, you have external costs such renter’s insurance and parking.
Pros and Cons of Home Ownership
Owning a home has its perks. If you plan on staying in an area long-term, then owning a home will give you a sense of stability. It also gives you the freedom to renovate the home and paint the walls according to your preference. Third, owning a home gives you tax reductions thanks to your property tax and mortgage interest payments.
On the other hand, home ownership also has its setbacks. First and foremost, your monthly home-related costs are higher than your renting costs. Next, because you own the house and you have mortgage to pay, you cannot just up and leave whenever you want to which decreases your mobility. And because the house is yours, you, therefore, need to shoulder the costs for repair and maintenance, too. Lastly, as the real estate market is always fluctuating, you face the risk of decline in property value.
Pros and Cons of Home Rental
Just like home ownership, home rental also has its advantages and disadvantages. Renting offers you flexibility so you can move to a new location much more easily when your lease ends. Renting also means that costs aren’t yours to shoulder should the home call for repairs and renovations. Lastly, monthly home-related expenses are lower compared to home ownership costs because you know exactly how much you’re spending every month.
However, home rental also has its downsides. As a renter, you are subject to community or home restrictions such as parking spaces, pets, etc. Second, there is always a risk of unpredictable increase in rent costs. Third, it is impossible to make any renovations without the owner’s approval. Lastly, you do not get any mortgage tax deductions.
You have now read the pros and cons of both situations. But before you decide on whether to buy or rent a home, you have to take into consideration your finances what your long-term goals are, too. Can you afford to own a home? Do you see yourself living in the same property and area in the next 5 to 10 years? Are you thinking of settling down and starting a family? Why are you looking to own a house? Taking these questions plus the pros and cons into consideration might help you decide what works best for you in the long run.