Advantages and Disadvantages of Renting vs. Buying a Home
For many of us, owning a home is a critical part of the ‘American Dream’. It’s ours. If we want to paint the bathroom lime green and our bedroom hot pink, we can. If we want to turn the spare room into a yoga studio, craft center, or workshop, we can. There are virtually endless possibilities in front of us. But the reality is that owning a home is much more complicated than the freedom to wield a paintbrush or pick our own appliances. There are a lot of factors to consider when it comes to the advantages and disadvantages of owning a home - and how it stacks up compared to renting. Let’s dig in.
Renting vs. Buying a Home
It is important to recognize that there are advantages and disadvantages of buying a house just as there are advantages and disadvantages of renting a house. No two peoples’ situations are alike, and many are perfectly happy renting. It makes sense for them. The key is to find out what makes sense for you. With that mind mind:
Buying a House: The Pros and Cons
Major advantages of buying and owning a house:
- You build equity. As many people like to say, you are investing in your own future instead of your landlord’s. You can draw on the equity to make home improvements, and it creates a good safety net.
- Over the life of your mortgage, it is likely that the value of your home will grow - sometimes significantly.
- As you make mortgage payments on-time, you build your credit, and boost your score.
- Mortgage interest and property taxes are often tax-deductible.
- You have control over upgrades, improvements, and renovations you want to make. Yes… even a hot pink bedroom!
- With a fixed rate mortgage, your costs are steady.
Now weigh these against disadvantages:
- The homebuying process is complex - and it can be stressful, especially for first-time buyers.
- It’s a long-term investment. This isn’t necessarily a bad thing - but it does limit your flexibility a bit when it comes to moving to different areas for jobs, relationships, etc.
- You will need to factor in additional costs, such as your down payment, closing costs, homeowners’ insurance, etc.
- You are responsible for property taxes and homeowners association (HOA) fees.
- When something breaks, you can’t call the landlord. It’s up to you to handle repairs, maintenance, and upgrades.
Renting a House: The Pros and Cons
Renting, too, has advantages and disadvantages. In the plus column:
- You have fewer upfront costs. If you have your first and last month’s rent, and security deposit, you’re all set.
- Apartments or houses may be furnished, and they will include major appliances (stove, refrigerator, etc.).
- Some utilities may be included in your rent.
- Once your lease ends, you have no commitment to the property.
- Repairs and maintenance are the responsibility of the landlord.
- Renters’ insurance is typically very cost-friendly.
Again, weigh the cons:
- You are not building equity.
- Your landlord can raise your rent.
- You may not be allowed to have pets or make certain modifications (e.g. painting the walls, adding a garden, etc.).
- Your landlord can choose not to renew your lease.
- If the property changes ownership, your living situation may not be secure.
- Your landlord will usually have access to your space to conduct inspections.