Whether you’re venturing out on your own for the first time or you’ve been around the block, you might still have questions on whether it’s better to have a mortgage or a rent payment.
Each side has some good points…but that only makes your decision harder.
With times being so uncertain, we understand it can get confusing when looking at properties. You don’t want to get into a rental agreement that you wish you could get out of, and you don’t want to be stuck owning a less-than-perfect house either.
The following guide can help you answer the age-old question, “Is it better to rent or buy a house?”
Renting
Renters make up just over a third of all households in the U.S and renting looks different for everyone. Some live in apartment complexes or townhouses, others rent 4-bedroom homes in the suburbs.
So just because you’re renting doesn’t mean you can’t live in a home that works perfectly for you. There are many pros and cons to renting/owning so we’d like to highlight some of those before delving into what might be best for you.
Pros
We know that you’ve probably heard that renting a place is the same as throwing your money away, but, comparatively speaking, renting is typically cheaper than owning a home.
Don’t believe us? Let’s look at the costs.
When you rent an apartment or home, you are not responsible for maintenance or repairs. Roof leaking? Refrigerator goes caput? Not your responsibility! You can also forget about property taxes and even utilities, in some cases.
Another plus for renting? No down payment! Sure, some places want first and last month’s rent or a deposit, but that is much easier to come up with than a down payment on a home.
Hate being stuck in one place? Renting makes it a lot easier to move. Selling and buying take a while, but when you rent, you just have to wait until your lease is up. And if you’re parting ways with a roommate, spouse, or significant other, there’s no complicated paperwork involved to divvy up assets and work out the finances.
Cons
One downside to renting is that—since you don’t own the house—you don’t get any say in what changes are made to the property. Deciding whether or not replace the tile with hardwood or what model of refrigerator to buy won’t take any money out of your pocket, but you won’t get a say in the matter, either.
Not owning a home yourself also means you’re not building equity. When you decide to move out, you won’t be able to sell your home and use the money to purchase another one. Some people may call that “throwing money away” but if you’d rather not have the burden of homeownership, this may be a small price to pay.
Buying
The remaining two-thirds of the country’s population own their place of residence, whether that be a condo, townhouse, or single-family home. Homeownership might be a way of life for the majority of American households, but for many renters, owning a home is a lifelong dream.
But does it make sense for it to be your dream? Let’s take a closer look.
Pros
One major upside to buying a house is that you’re building equity.
Equity is basically the difference of what you’ve paid minus what you owe. For instance, if you paid $200,000 for your home and paid it down to $150,000 then you’ve got $50k in equity. If you’re able to sell your home for more than you originally paid for it, you can increase your equity.
Another pro is that buying a house “locks in” your monthly payments. While your rent payments can (and often do) go up from one lease term to another, your mortgage payments will remain the same until the house is completely paid off (unless you refinance).
You’ve heard it said that real estate is a great investment, and it’s 100% true! If you’re so inclined, you can make money off your properties! If you’re able to rent out a property for more than what you are paying per month yourself, that can be an excellent source of income.
Cons
One of the biggest obstacles to buying a house is qualifying for the loan. There’s a reason that homeownership is a lifelong dream for many people; it’s not always easy to buy a house! (Or sell one, for that matter.)
Another drawback to being the proud owner of a new house is that you are 100% responsible for it. This not only means paying the mortgage, but taking care of maintenance, home insurance premiums, taxes, HOA fees…the list goes on.
Is It Better to Rent Or Buy?
One important thing to remember is that there is no single good answer to this question. There are significant pros and cons to both renting and buying a house and the real estate market is constantly changing.
At American Home Team Realty, we always try to caution people who say that renting is “throwing your money away.” In reality, both renting and owning are viable options that should be considered equally before making such a huge decision.
Renting can be a great way to simplify your life (no tedious, expensive repairs!), try out a new neighborhood, or simply have a roof over your head while you’re saving up to buy a house. And owning your own home can give you a sense of security.
Whether you’re thinking of renting from us or a landlord looking to buy an investment home, we are here to help you every step of the way. Contact us with any questions you may have.
