To Rent a House or Buy a House? That Is the Question
Owning a home has long been the cornerstone of the American dream, but for many people, achieving that dream has been delayed indefinitely. In fact, according to the Pew Research Center, the percentage of households that rent their primary residence is the highest it’s been since 1965. While the number of households in the country has increased by 7.6 million between 2006 and 2016, the number of heads of households who owned their homes has largely remained unchanged.
There are a variety of reasons for this stagnation, including rising home prices, fear of another market crash and the burden of student loans. However, even in spite of these commonly held reservations, the vast majority of renters surveyed said that they hope to buy a home at some point, and well over half said that the rent because of their current financial situation, not because they want to.
When it comes to renting versus buying a home, there is no one-size-fits-all solution. It’s important to consider your own needs and what will provide the most significant benefits in the long run.
Buying a Home
For many people, buying a home makes the most sense, both from a financial and a lifestyle perspective.
You Build Wealth
Those who buy real estate are making a long-term investment. For most people, their home is their most valuable asset. While rent payments go solely to the landlord, every mortgage payment you make is going toward your home loan. Even if you don’t pay the loan off entirely before you move to a new house, you can walk away with a large sum of money. In this way, owning your home is like forced savings.
You Can Enjoy Greater Privacy
Most landlords keep tabs on their property to ensure that their tenants are taking proper care of it. In most states, a landlord can visit at any time, whether you’re home or not, provided they give 24-hour notice. While some tenants take this in stride, others find it invasive and inconvenient. Owning your home eliminates these unwelcome intrusions.
The Financial Downside
For most people, a monthly mortgage is no problem; the challenge is coming up with the initial costs of purchasing a home. Fortunately, there are mortgages that require a low-down payment or even no down payment, making the dream of homeownership a much more realistic one.
No matter how new the home is, it will inevitably need occasional home repairs. These expenses can be as minor as replacing furnace filters or as major as replacing an HVAC unit. To help lighten the financial burden, many homeowners choose to purchase a home warranty, which can provide peace of mind and save a lot of money in the long run.
Renting a Home
While buying a house is the ultimate goal for many, there are some reasons to rent a home.
Moving Is Easy
Particularly for those whose jobs require that they are able to relocate at any given time, renting a home is a sensible option. Selling a home can be a big undertaking, and depending on the housing market in your area, you could end up paying for two mortgages. While most landlords penalize their tenants for breaking a lease, it is still a much easier process than attempting to quickly sell a home.
Home Maintenance Issues Fall on Someone Else
Depending on your landlord or property manager, you may still be expected to replace furnace filters and smoke alarm batteries every once in a while, but if a pipe bursts or the furnace gives up its ghost, someone else will be shouldering the financial burden.
The Financial Downside
Renting isn’t always the budget-friendly option; in fact, compared to owning a home, it can be quite expensive. Many landlords and property managers require a deposit equal to two months’ rent, as well as application fees, pet fees, and cleaning fees. Your monthly rent will likely be higher than a mortgage for that property would be, because, in addition to paying on the property, your landlord is also making a profit. On top of that, once your lease is up, your landlord can raise your rent at their discretion.
When it comes down to it, buying a home offers an array of benefits that renting never will: the ability to put down roots, the feeling of pride of home ownership and the opportunity to build wealth.
Buying a home can be a much more affordable option than paying rent month after month and year after year. The key is to determine how much of a monthly payment you can comfortably afford and to talk to a lender or broker about the mortgage options available to you.