Summertime is the busiest homebuying season of the year. If you’re a renter who’s thinking about buying a home, this guide can help you decide if buying is the right move for you. We’ve listed some of the pros and cons to both renting and buying to highlight some aspects that can get overlooked.
What You’ll Learn
When renting a home makes sense
The practical and financial benefits of buying a home
How your life planning can impact the decision to buy
There are benefits to renting
For most people the biggest benefit of renting is that compared to the down payment needed to buy property, renting doesn’t require much cash upfront. Landlords or property managers typically require a security deposit and there may be some fees associated with connecting utilities, but renters don’t face closing costs or a down payment the way they would when buying.
Since they don’t own the property, renters have less responsibility than homeowners. It’s the landlord who covers the taxes and, in most cases, maintenance and repairs of the property. If, for example, there’s a storm and a tree branch breaks a window, it’s up to the landlord to have that fixed. Renters also have the freedom at the end of their lease without having to do the work of selling the property.
There are benefits to owning
The best thing to remember when comparing renting with buying a home is the concept of ownership. When you buy a home, you are responsible for the taxes and maintenance for that home, but that means that you have control over how things are maintained and upgraded. One of the biggest drawbacks of being a renter is that you often have little control over what the landlord thinks is a suitable fix.
When you buy a home, you’re investing your money and building equity. When you pay rent, there is no return on that money. When you pay a mortgage, you’re paying down a loan to eventually own the property outright. If you sell your home and the value has increased, you have the potential to make money on it. Even if the value hasn’t increased, you’re likely to at least get back some of what you paid into it.
Another financial benefit to owning your home is the possibility of tax deductions. When you take tax deductions into consideration, the true cost of a mortgage may actually lower than it seems at face value.
It all comes down to life planning
Owning a home is a commitment, but it’s also an investment. Like any investment, you need to factor the cost into your life plan. The upfront costs of buying a home can be intimidating but there are a number of first time homebuyers assistance programs to make a down payment affordable. Take a look at our first-time homebuyers guide.
Ultimately the decision comes down to what makes sense for you. If you’re considering buying a home and building equity, you can use our affordability calculator to get an idea of how much house you can afford. Even if you aren’t yet ready to start home shopping, it can give you perspective to compare how much you could be spending on a mortgage payment versus how much you’re spending on rent.