Renting or Owning a Home: Understanding Which is Right for You
Renting or owning a home are both big decisions with long term outcomes. Furthermore, renting or owning a home is a financial commitment that requires early planning. There are pros and cons to each alternative, so it is wise to consider each and think of which is best for you, depending on your capacity and circumstances.
Before you decide whether to rent or buy a home, you have to consider your budget. Additionally, you have to ask yourself if the choice would make you stretch your finances and if you can afford such stretch. Here are some more of the things you have to weigh before deciding to rent or own a home.
The costs to rent or own a home differ and depend heavily on where you are located and on the local housing market. Renting is known to be generally cheaper than buying or building a home. Renting frees up money for other things like savings. However, shifting real estate markets could mean that it may be cheaper to buy than rent in certain areas. The right choice is the one that fits your goals and finances.
Most rental properties demand security deposits that the landlord usually requires to protect him against damages to the properties caused by the renter. Additionally, you would usually put down the first and final month’s rent payments upon signing the rent or lease contract. Upon evaluating this contract, inquire if your monthly rent includes utilities like electricity, water, cable, gas, or the internet.
On the other hand, homebuyers will be expending monthly mortgage payments that are inclusive of the principal cost and interest. Since mortgages are fixed expenses, you won’t have to worry about rising rent rates. Moreover, you should also expect a 3% to 20% down payment on the home’s purchase price. Usually, if you put down a less than 20% down payment, the lender will typically require you to get private mortgage insurance.
Furthermore, during the homebuying process, be ready to pay for a home inspection and quotes for repairs from the contractors. Also, be prepared for hidden expenses that come with homeownership. If you are purchasing a property in a homeowner’s association, you need to factor in monthly HOA dues. These dues usually include the costs for community services like landscaping, exterior maintenance, and community amenities.
Buying a House Can Build Equity
Homebuyers can take advantage of the equity of their home accumulates over time. This means that if home values go up, you can gain higher cash if you sell it. Real estate prices do not usually increase in short-term periods. But if you stay in your home long enough, there is a high likelihood that you will be able to sell your home at a profit.
This is advantageous for those individuals taking their homes as long-term investments. Since residential estates tend to rise in value over time, buying a home is one of the best long-term investments you can make.
Home Maintenance Costs
It is good to note early on that homes will need repairs and maintenance over time. When you are renting, the landlord usually shoulders those costs. For instance, if the air conditioning system or the refrigerator breaks, the landlord has to fix it.
Meanwhile, as a homeowner, you will be responsible for those repairs and periodic maintenance. These expenses usually add up fast, so you have to be prepared for these costs too. People deciding on renting or owning a home need to factor in these costs. Deciding homeowners should review the seller’s disclosures and get a home inspection to be aware of potential red flags.
Deciding Whether to Rent or Own a Home
The debate over renting or owning a home is not clean cut. This decision will depend upon what you want and what you can afford. When considering whether to rent or buy a home, ask the following questions:
- What can you afford?
- How long do you plan to stay in this home?
- Do you need stability or flexibility?
- Will you be able to afford home repairs and other maintenance?
- What are your financial, family, and career goals?
If you are moving to an unfamiliar city, with an unstable job situation, or not sure if the neighbourhood will feel like home, it is better to rent for a period of time. Until you get a sense of what you like or don’t like, then you can start exploring different purchasing options.
Moreover, for those individuals with changing personal situations, like planning to get married, it is a good idea to look for properties that they will not outgrow quickly. Evaluate your current life situation and consider how likely that will change in the near future. It is recommended to rent as a way to decompress before making large purchases that will not suit their changing lifestyle.
Live Life With Better Choices
Making these decisions are not easy. But with the right knowledge and considerations, it will help you make better and well-informed decisions. Get more lifestyle news on our Top World Business page.