There are many factors and costs to consider when deciding to rent or own. Each comes with many benefits and disadvantages, and it is up to you to decide which are more important to you and best fit with your current financial situation.
Renters are responsible for paying monthly rent payments, utilities, and possibly parking or other extra monthly payments for amenities offered by the landlord. As a renter, you are able to have more flexibility with regards to where you live, how long you live there, how much you pay, and how often you move. Depending on your rent costs and financial situation, renting can allow you to save more money because there are fewer required costs that are needed to own a home, such as maintenance, property taxes, general upkeep, major repairs (roof, foundation, etc.), and typically higher utility bills. Renting ultimately requires less responsibility and offers more flexibility to the renter in ways not possible for home owners.
While less responsibility and more flexibility are appealing to some, the disadvantages also have to be considered. When renting, you are not building up equity in a home and do not have a major asset that will grow in value. You also have less security with renting because rent increases usually outpace the economy, so it is unlikely your rent payments will stay the same year to year.
While owning a home may be more expensive in certain aspects than renting, there are certain benefits and advantages that are appealing to potential home owners. Owning your own home provides a sense of responsibility, community, stability, and security. At the same time you are building equity in your home with each monthly payment, you are also not at risk of having your mortgage payment increase over time. Knowing what your monthly housing cost is for 30 years is comforting for many. Tax breaks and incentives also provide for additional financial benefits for you when filing your tax returns. You are able to deduct the interest you paid and capitalize on additional tax credits that will reduce the amount of your taxable income, keeping more money in your pocket.
Aside from the fact that owning a home is more expensive than renting, there can be other disadvantages that make renting more appealing for some. The cost to keep the house in good condition might be too much for some, especially when new appliances or a new roof is needed. If you fail to keep the house in good condition, you risk losing significant value in your home, which can cause issues when trying to sell your house or cash in on any equity built up in the house. The lack of flexibility is also a concern for some. Once you purchase a home, it is difficult to move, especially when the real estate market is not favorable to selling.
To make your decision easier, list out all the costs associated with each and then look at your current financial situation. Are you able to save to cover the cost of a new roof or do you need to cut expenses and save for a while before you are able to buy a house and cover the costs associated with owning a home?
Check out our housing calculator to find out how much house you can afford (link to calculator page) to get an idea of what your mortgage payment might be and how much you have left over to cover additional expenses.
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