There is a lot of debate out there right now regarding whether it’s cheaper and more affordable to rent compared to paying on a mortgage payment. However, you are missing out on a lot of benefits by just renting. In this post I’ll go over the pros and cons to renting vs. owning a home of your very own.
Advantages of Buying a House
- Every payment brings you closer to owning the house. When you pay your rent, that money is spent. Gone. Bye. Never to return. However, when you pay your mortgage, you are working towards full ownership, so the money that you’re paying is actually an investment in real estate!
- You can cash in on appreciation. Your home will most likely increase in value over time depending on the current market in your area and how well you take care of your home ( a lot of care for a home is in the little things!). What you buy for $200,000 today could sell for $260,000 down the road.
- You have tax advantages. Many of the costs of owning a home—like property taxes—are tax deductible. And if you’re paying off a mortgage, you’ll get to count your mortgage interest as a deduction when you file your tax return. Some states even have homestead tax advantages which reduce your overall real estate taxes each year.
- You have the freedom to renovate your house. As the owner of your house, you can do whatever you’d like to it. If you want to paint space shuttles on the ceiling in your son’s room, Bible verses on the baseboards in the hallway, and hot pink balloons on the bathroom walls, no landlord can stop you—and generally a bank doesn’t care!
- Use Your House & Property To Make Money! Lots of homeowners are utilizing their home for nighttime rentals such as Airbnb or that extra basement space as their own rental unit, which can put more money in your own pocket as a homeowner. Homes on acreage or agricultural land can also take advantage of agro-tourism, establishing a business at home or really anything you want (legally!)
- You have more privacy. Ugh! The neighbors are fighting again—and because the drywall is as thin as a playing card, every tenant can hear them, upstairs, downstairs, next door and down the street! But guess what? You have your own house and peaceful, delicious, glorious silence!
- It’s yours! You have a house! You have the satisfaction of knowing you made the American Dream your reality and then some.
What are the advantages and disadvantages of renting?
Just as home buyers face advantages and disadvantages, renters have their own set of pros and cons. Here are the most important ones.
Advantages of Renting
- You can move with ease. Tired of the city you’re living in? Thinking about taking a year to travel the world? When you rent, you don’t have to stay in the same location. Plus, it’s much easier to get out of a lease than a mortgage, but make sure that you can get out of your lease or rental agreement without paying any early termination penalties for doing so and sometimes Landlords will require notice between 60 and 90 days and if you will be gone for a long period of time.
- You (usually) don’t pay for maintenance costs. If the stove goes out, no longer works or the fridge just up and dies and the faucet pipes burst, you don’t have to call the plumber or make a trip to the appliance store (unless of course, you have a bad landlord!). You call the landlord. One of the biggest perks of renting is that you never have to worry about surprise repair costs. And if you have renter’s insurance, you’ll be better prepared in case something does happen.
The Disadvantages of Renting
- Rent rates will and DO go up. Rental rates will rise, assessments for taxes and insurance on the residence will rise and your Landlord is going to fit that bill, but a savvy landlord will address these costs in the next rental increase, maybe your job won’t hold up to that yearly increase, but you’re lease will require that it be paid or you to move out or be evicted, otherwise.
- You have no financial incentives. No tax deductions. No equity. No rising property value and assets. You’ll never see the money you pay again it just flies away and you certainly can’t Airbnb it if you decide to take a long trip (in the majority of landlord rental leases there’s no subletting allowed).
- You have less freedom to renovate. Even though you think hardwood floors would look great in the bathroom, your landlord may not approve of your renovation idea, especially since they’ll be the one to pay for the removal or renovation of it after you leave. You have little say in what your place looks like overall which provides for less freedom and customization that you may want.
Is renting always cheaper?
Homeownership often tips the money scale because you usually have pay for maintenance, taxes, and homeowner’s insurance on top of your mortgage payment (this can also be included in HOA fees, but that’s a lesson for another time). Long-term costs, however, paint a different picture overall and can offer some pretty good benefits to boot!
If you bought a house today and lived there for seven years, you’d save 33.1% compared to renting.(1) So how does that work, exactly? You’ve got inflation on your side (inflation is a sustained increase in the value of goods and services in an economy over time). When you own you’re very own home and property, you won’t have to worry about a landlord upping your rent each year or attempting to price gouge you unexpectedly. Overall the monthly costs are essentially locked in for as long as you live there, plus you can make money off your home! When your house’s value goes up and your mortgage principal goes down, you’re investing money in your house that you’ll get back if and when you sell it.
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