Should You Rent or Buy
For many adults, there comes a time when they’re posed with the decision to transition from renting to buying a home. From upfront costs to insurance, taxes and other fees associated with buying a property, this is certainly not a decision to be taken lightly.
To offer you some insight, we’ve compared renting and buying to help give you a better idea of the option that will best suit you financially.
Buying a Home
Buying a home has relatively more upfront costs than when renting one. Depending on the program your financing your new property through, these fees can vary significantly.
Closing costs can be anywhere from 2-5% of the property value and a down payments can fall within the range of 0% down all the way up to 20%.
Owning a home consists on ongoing costs that you’ll pay on a monthly basis. These include but are not limited to:
Monthly Mortgage Payment consists of:
Property’s principal balance
HOA (Homeowners Association fees if applicable)
Utilities (i.e. cable, internet, heat, water, electric)
When you own a home, you’re responsible for managing any necessary maintenance and upkeep.
This varies to include things such as:
Trash and Recycling fees
Wear and tear on the home
Repairs and renovations
Long-Term Benefits of Buying
While initially the cost to own a home requires more money upfront, you may decide that the long-term benefits outweigh any initial expenses that you were required to cover at the time of purchasing the home.
It’s an Investment
Over time, the value of your property will appreciate. This means that after 30 years, a home that you may have purchased for an initial cost of 250,000 will be worth 1.4 million dollars by the time you’ve paid off your mortgage.
There are certain tax deductions that most homeowners will be eligible for. Relative to your home loan program, you may qualify for tax breaks stemming from:
Strengthen Your Credit Score
Having a consistent mortgage payment that you regularly make on time each month can dramatically help to increase your score.
Decorate How You’d Like
When you own a home, you’re more often than not free to decorate however you please. So, those pink walls your old landlord wouldn’t let you paint, it’s time to whip out the brushes.
Increase Your Net Worth
As you pay down your loan, you’ll earn equity in the property which contributes to your overall net worth. Even better, once you’ve fully paid off your mortgage, you can live rent-free! Any money that you would have put towards paying down your home can now go to savings, retirement funds, or that sports car you’ve been keeping your eye on.
Renting a Home or an Apartment
The initial costs of renting a home or apartment are fairly nonexistent when compared to buying a home. Generally, you’ll be required to pay one month of security deposit and any broker fees if applicable.
As a renter, you’ll be required to make regular monthly payments that may include but are not limited to:
• Monthly Rent* • Renters Insurance (if required by your landlord) • Utilities (i.e. cable, internet, electric, trash, pest control, etc.)
*It’s important to be consistent when weighing the cost of monthly rent against the cost of a monthly mortgage. Be sure to use relative examples, as a 1-bedroom apartment vs a 4-bedroom family home is an uneven comparison.
There are generally very few hidden costs when renting. When signing your lease, you’re going to want to thoroughly review any costs and fees that you’ll be required to pay throughout the duration of your lease. This might include any pet fees or costs for parking.
Pros of Renting
Renting offers you a bit more mobility as you aren’t limited to one place once your lease ends. While owning a home doesn’t necessarily restrict your flexibility, it just requires a bit more financial attention if you were to move.
You generally aren’t responsible for maintenance as that is included in your rent and is required by your landlord to handle
Cons of Renting
With inflation, your rent will more than likely increase each year; whereas a monthly mortgage payment is consistent throughout the lifetime of the loan.
Generally, the appreciation on your home will accelerate slightly faster than rent inflation.
You Don’t Own the Property
As a renter, the money that you’re paying each month isn’t going towards anything that will directly benefit your net worth, such as equity.
When renting a home or apartment, individuals are beholden to their landlord’s restrictions. This many limit pets or not allow any at all, as well as require that you comply with decorating and furnishing regulations.
Another downside is that once your lease is up, the landlord can decide they no longer want to rent it out. While they’re legally required to give you notice within two months of the lease ending, it may still not offer the amount of time you’d need to financially prepare for a move that you weren’t anticipating.
Interested in Learning More?
We’re excited to share with you our expert industry knowledge, so that you have all of the necessary information to make the best decision that benefits you.
Whether you’re interested in buying a home today, or simply want valuable information that can help you make the decision tomorrow, we welcome you to contact us by either giving us a call at (insert number) or emailing (insert email).
We look forward to offering any assistance that we can to support the beginning of your new journey