Renting Vs. Owning: What’s Right For You?
Recently it seems as if the media has been blanketed with a frenzy of renting a home vs. owning a home, creating unnecessary hype surrounding the market. Truth is, whether you rent or own is entirely up to you and there are many benefits on both sides. As a way to help wrap your head around your different options, I have outlined the pros of renting vs. the pros of owning.
Pros of Renting:
You don’t have to worry about maintenance and you have someone to call if there is ever an issue. Depending on where you are renting, general maintenance of appliances, plumbing and electrical are often taken care of by the property manager or landlord. Sometimes even landscaping and yard work are included too - bonus!
You can pick up and move with little hassle. Besides the everyday fuss of moving, it is relatively easy to change locations of rental houses. Want to live abroad for a year and not pay rent? Easy. Don’t like the neighborhood? Move! It’s easy to find a new one when your lease is up.
The deposit is smaller. With renting, you are usually responsible for first and last month’s rent which, depending on where you live, can be a good chunk of money upfront. But it is often times less expensive than a down-payment. Typically when purchasing a home, in an ideal situation, you want to put 20% of the purchase price down in order to avoid Private Mortgage Insurance or PMI. That 20% will likely be more than the deposit on your rental which can be beneficial in many financial situations.
*Lending is not in my direct wheelhouse, so make sure you chat with a professional to learn more about the different loan options available. If you looking for a fantastic lender, please reach out, I know a handful of great ones that will take good care of you!
Pros of Owning:
Your home is an asset, so the money you are paying every month is going toward building equity. Unlike when you rent, you are most likely paying all or the majority of the owner’s mortgage for them.
Personalization. Since you are the owner, you are free and clear to do whatever you want? Hate that burnt orange shag carpet from the 70’s? Rip it up and put in hardwood! Looking for an easy and quick way to freshen the space? Paint the walls and change up the fixtures or hardware. Both are reasonably easy and affordable, and can really affect the aesthetic of the home.
Pets. Often times in rental situations, there are limitations to the number of animals you can have and what type of breed they are. If you happen to have a soft spot for more intimidating breeds such as pitbulls or german shepherds, landlords can dictate what is allowed to live in their unit. If you own your home, it’s your property and up to you!
You are able to deduct mortgage interest and property tax. This made headlines in 2018 as the amount was recently lowered, but it still does provide a benefit to homeowners when tax season rolls around.
Your friends could help you pay your mortgage. Depending on the size of your house, renting out a room or two to some close friends (or use a short term rental platform like AirBnb or VRBO) can aid in monthly payments.
Privacy. No more landlords or property managers. Who comes and goes is entirely up to you.
If you personally don’t have 20% to put down, there are options! In the majority of the cases that I’ve seen, gift money from loved ones has been a common theme. Some younger home buyers have asked for inheritance early, cashed out stock, or even pooled money with a couple of friends. Like I mentioned above regarding PMI, it is usually a couple hundred dollars a month. But at what point is it more beneficial to pay that and be in your own place, then see your money go to another person’s portfolio?
Payments are often fixed. When you apply for a mortgage, you know the financial commitment you are getting yourself into.
The value increases over the years. The rate of appreciation for real estate across the board is on average about 4-6%, but could be higher depending on the area and what the market is going at the time.
Curious whether renting a home or buying a home is a better fit for you? Let’s chat. I am happy to go through the pros and cons of both options and help you decide which direction to go.