The Pros and Cons of Renting vs. Buying a Home
When you’re sifting through the real estate market in hopes of finding a home, you will consider renting vs. buying a home. This article is a clear look at the benefits of renting vs. buying a home. When it comes to renting vs. buying, there are pros and cons to both. You will learn about the benefits of owning a home as well as the disadvantages of owning a home. You will also dissect the disadvantages of renting versus the advantages of renting. It all begins when you examine your financial situation, lifestyle, and desired living area. We’ve compiled some information that will help you observe the pros and cons of renting vs. buying a home. You’ll find that there are plenty of advantages of renting vs. buying a home, as well as cons.
The Advantages of Renting
As we find ourselves in a real estate bubble with sky-high housing prices, our responsibility is to avoid financial burdens. When you choose to rent, you can save to invest in a multi-family property, which can eventually be a rent-producing asset. The most successful entrepreneurs and business people will tell you that two-three incomes streams are always better than one. What else comes with the benefit of renting a home?
- Financial freedom: Plenty of people decide that they would rather rent because they aren’t sure where they’ll be in 5-10 years. For some, being able to jump around without the worry of a mortgage provides them with a sense of stability.
The Disadvantages of Renting a Home
When you’re examining the disadvantages of renting a home, you’ll want to look at your lifestyle. Are you looking for short-term comforts? The disadvantages of renting vs. buying a home surround are easy to see. It comes down to personal preference and finances. Aside from rent-to-own agreements, you’ll need to be comfortable spending money on a place that you do not own.
- You’re spending money that doesn’t go towards owning the property, which to some people, can seem like you’re giving money away every month.
- Leasing agreements: While in states like California, the law is often on the side of the renter, you can still get stuck in a bad lease. A poor living situation can do more than cripple you financially. If you break a lease, you run the risk of messing up your rental history and possibly even your credit if you get hit with a fee.
Tips & Tricks for First Time Home Buyers & Rents
If you’re looking at the differences between renting vs. buying a home, we have answers. Many young people tend to shy away from home buying and its benefits. Why is this? People get too wrapped up in the potential disadvantages of owning a home. There are plenty of advantages of renting vs. buying a home. One of the advantages of renting vs. buying a home is that you don’t have to worry about upkeep. If your pipes burst, call the landlord. If there’s a home owner’s association fee, your landlord handles it! Younger generations aren’t into upkeep, and we understand that. However, there are a few tips and tricks for first time home buyers that will help them navigate the disadvantages of owning a home. Take a look at the following tips and reevaluate how you feel about renting vs. buying a home:
Tips You’ll Need When Renting vs. Buying a Home
–Look at your budgets. One of the advantages of renting and buying is knowing your budget. Sit down and look at your gross monthly income – what can you afford?
–Save lots of money. You’ll have to put down a large chunk of cash for a mortgage. When navigating renting vs. buying a home, please be aware that you’ll have to save either way. When purchasing a home, you generally need at least 20% of the purchase price as a down payment. One of the advantages of renting is that you don’t have to save a hefty down payment. However, you’ll likely have to pay first and last month’s rent up front. If you have poor credit, you might also have to pay an additional deposit.
–Build your credit! When you’re looking at renting vs. buying a home, you’ll want to have a good credit score.
-There are statewide programs set in place to help first-time home buyers, so research yours! For instance, the American Dream Grant Program only requires you to pay 1% for your mortgage payment. It can also help you reduce closing costs. When considering renting vs. buying a home, these programs are essential.
Renting vs. Buying a Home: Benefits of Owning a Home
- Tax deductions. You can likely subtract mortgage interest and property taxes from your income taxes, saving you tons. Talk with your tax professional about renting vs. buying a home.
- No Landlords. It’s your house so it’s your rules. You can alter the home to your liking, so long as you don’t have a home owner’s association breathing down your neck.
- Establish good credit. Since the home has a deed, it is considered secured credit and offers positive impacts on your credit score (if payments are made in a timely manner).
- Own an asset. Your net-worth will go up when you own your home, making it an asset. Although we do not recommend this, if you ever get into debt or need a quick loan, you can use your home as collateral.
Why It’s so Hard For Millennials to Buy Homes
Before the Tiny House Movement made its big debut, many Millennials are forced to think of renting as their only option, and here’s why. When considering renting vs. buying a home, the cost is generally the biggest set back for most people. The overall cost of renting vs. buying a home has increased compared to the baby boomer generation. As we all know, most Millennials are carrying student loan debt on their backs. With rising housing costs, a lack of starter homes on the market, and a large amount of personal/student loan debt stacking up, it’s easy to see why when making the consideration between renting vs. buying a home, many millennials prefer to rent. When thinking about renting vs. buying a home, wouldn’t you opt for renting if you felt it was the only feasible option?
Disadvantages of Owning a Home
If you’re exploring the disadvantages of owning a home, you’ll want to consider personalization, financial liability, and your investment. While the overall benefits are no joke, neither are the disadvantages. Consider this when you’re comparing renting vs. buying a home:
- Huge financial liability. If something happens to you and you can no longer afford your home, unless you sell it fast, you’re going to lose your home and all of the money you put into it. The worst part is that the first five years of mortgage payments will be interest-based.
- Not all of the money spent on mortgage goes towards owning the home. Part of your loan will cover things like closing costs.
- Either a large investment or huge debt: The duality of a mortgage is what makes it such a touchy subject. Unless you own a tiny home outright, a large sum of your money is going to be tied up in this purchase.
Renting vs. Buying a Home – Which is Better?
All in all, the differences between renting vs. buying a home vary. It all comes down to your financial, lifestyle, and the where you live. You can explore both the benefits of owning a home and the disadvantages of owning a home through research. You can also look over the advantages of renting vs. buying a home and the disadvantages or renting online. Talking to experts in the real estate fields will also help with renting vs. buying a home. When it comes to renting vs. buying a home, we want to ensure that you have all of the information that you need. However, we are sure you’ll come to a conclusion that fits. If you have questions about renting vs. buying a home, contact us.