Rent vs. Own: Which Housing Option Is Best For You
We are often told that buying a home is the ultimate life goal, but not everyone has the same goal or is subject to the same lifestyle or living conditions. Therefore, becoming a homeowner is not for everyone. Although many people believe that purchasing a home and becoming a homeowner is the best financial decision one can make, renting may be the best option for you.
Here’s how to determine which one is suitable for you.
Advantages to Purchasing a Home
When it comes to purchasing a home, there are many benefits. The main advantage of buying a home is that a home is an asset that almost always increases in value over time. That means that you can grow your equity and net worth as you live in your home. Thus, after the mortgage has been paid in full or if you have enough equity in your home, you can sell your house for a profit and use the funds to purchase a different home. Alternatively, you can also use the equity in your home in the case of a financial emergency.
Another vital benefit of owning a home is that the extra space could help you generate passive income through house hacking or other opportunities. The extra money could help pay for the monthly mortgage payments.
Disadvantages to Purchasing a Home
The common roadblock and disadvantage in becoming a homeowner is the lump sum of money required for a down payment. If you live paycheck-to-paycheck or are struggling to pay for your basic expenses, it won't be easy to save such a large amount of money. In fact, over the past year, housing prices have increased by 17.2%, making it even more difficult for young buyers to try and enter the market.
Suppose you are looking to make the transition from an apartment or rental property to being a homeowner. In that case, you will find yourself responsible for paying and fixing all maintenance to keep your home in acceptable living conditions. You are now accountable for all responsibilities such as cutting your lawn, repairing leaks, and so on. As a homeowner, putting in a maintenance request is no longer part of your living situation. Of course, you can hire a maintenance person for your home, but it will be on your dollar.
Advantages to Renting a Home
When renting a home or apartment, there is a lot more flexibility than owning. Once your lease is up, you can choose to move anywhere you want. You can renew your lease and stay at your current location, move to a different local rental property, or even move out of state or out of the country. With a mortgage, on the other hand, the homeowner has entered a long-term commitment usually lasting 15-30 years. Therefore, if you moved to a city for a short term, such as a time-based work assignment or school, renting gives you the flexibility you need.
Another advantage to renting is that it can be financially accommodating. You may have to pay a security deposit or the first month's rent, but you won't have to pay tens of thousands of dollars for a down payment as you would with a home. Another financially friendly plus to renting is not having to pay maintenance or repair fees. As a renter, your landlord will be responsible for any issues that come up while living in your rental space.
Disadvantages to Renting a Home
Just like with homeownership, renting also has its disadvantages. One common issue that arises is that your landlord may be unreliable or unprofessional when it comes to maintenance or repairs, making it difficult for you to live in a space that is unsafe or has poor living conditions.
Another disadvantage to renting is that landlords can raise the rent price every time you decide to renew your lease, which can negatively affect your financial situation, especially if the rent increase is higher than you expected.
Lastly, as a renter, you do not have the freedom to do what you want with the home you are renting without permission from your landlord. You must obey the rules and guidelines within your lease, or else you will risk being evicted.
In conclusion, it is important to look at your financial situation and go through the disadvantages and advantages of renting versus owning a home. The general rule of thumb is to rent if you only want to stay somewhere for five years or less. However, everyone's situation is different, so it is essential to thoroughly research before making a significant financial decision on which living arrangement is the most suitable for you.
Which living arrangement is better for you, and why? What are some other advantages or disadvantages of owning or renting a home? Let us know in the comments below.