Should You Rent or Buy a Home?
Here are some pros and cons to consider before deciding whether to rent or buy a home.
When you're looking to move into a new home, you have to decide whether you should rent or buy. While your options will be somewhat dependent on your income and credit, plenty of considerations come into play when deciding which route to take.
For starters, ask yourself how long you intend to stay at this place of residence. Do you plan to pack up and move again within the coming years, or will you settle in for the foreseeable future? Also consider the expenses that come along with each option and ensure that you'll be able to cover them, barring any unforeseen circumstances. It may help to examine the pros and cons of both buying and renting.
Pros of Buying a Home
There are plenty of pros to buying a home, which is likely why it is commonly associated with "The American Dream." Owning a home means you can build equity over the years. How quickly this happens depends on you. If you pay a sizable down payment, secure a 15-year mortgage, and improve the property, for example, you can build it rather quickly.1
Another pro of owning your own home is being able to do what you want with it, for the most part. While there may be limitations imposed by your local government or homeowners’ association, you largely have the say when it comes to any changes/improvements you'd like to make. You don't have to answer to a landlord as you would with a rental property.
Owning a home also gives people a feeling of accomplishment and stability. There’s emotional value in not worrying about rising rent and if you'll have to move after another year.
Being a homeowner may also mean tax benefits. As MortgageCalculator.org explains, "When a consumer considers purchasing or selling a home, they should consider the fact that there are many tax benefits that could potentially make owning a home quite profitable. By far, the buying of a home can be one of a consumer’s biggest investments. Due to various tax benefits put in place by the government to encourage consumers to purchase homes, buying a home could be a very wise decision. Ultimately, the consumer taking advantage of these tax benefits could save a great deal of money either at the time of purchase or the time of sale. Due to the various restrictions and conditions regarding these tax benefits, it is important to consult with one’s financial advisors or accountants to fully understand the benefits and opportunities of tax benefits to those who own homes."2
Cons of Buying a Home
Buying a home isn't without its drawbacks. Being a homeowner means that you are responsible for maintenance and all the costs that come along with that. If repairs are needed, you can't just call the landlord to come and fix things. You'll have to either figure out how to do it yourself or call in the experts to do it for you, and that can get pricey depending on the services you require.
There are also costs associated with buying a home and selling it later, should you choose to do so. Closing costs, realtor fees, homeowner’s insurance, etc. can add up, and these are things you don't have to worry about if you rent.
Another con is that your freedom becomes somewhat limited. It's much more difficult to quickly move if you get a new job or you want to downsize or upsize your living arrangements. You'll have to go through the home sale process, which can take time and cause stress, not to mention a lot of work getting the home ready for the market.
Pros of Renting a Home
Renting means you have more freedom and flexibility to move as you like. While you will have a lease to honor and fees to pay if you break it, you won't have to worry about selling a house when it comes time to move.
Renting means you can avoid all those costs that come along with buying a house. It can also be nice to have a landlord to rely on when things break down. It can save you some cash as the landlord foots the bill.
If you rent a home in a complex or housing development, you might have access to a free exercise room, a swimming pool, or other amenities.
Cons of Renting a Home
Renting a home, however, means that there may be strict rules that you must follow. Some landlords are more lenient than others, but if you break the rules, you'll end up paying for it, and may even be evicted.
You might have problems getting your landlord or property manager to fix or repair something. There might be a disagreement about what is their responsibility and what is yours.
You also miss out on the tax benefits that my come with home ownership, as well as the equity that you can build up. What's more, your rent may increase over time.
Ultimately, you can be happy buying or renting, but the path you choose will ultimately come down to your own needs and financial situation. If you want information on housing options, or to see whether buying a home is right for you, ask your banker for some professional guidance.
1. This online calculator can show you what your payments will be with different financing options.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC