For most people, purchasing a home is a momentous occasion and a financial milestone. However, how can you tell if you should keep renting or make the huge decision to buy a house? There is no direct answer to this question since both options have pros and cons. Besides, your choice will significantly depend on your financial situation, and in most cases renting is more affordable.
It is vital to note that this might not be the case every time; your choice can also come down to various lifestyle considerations like looking for stability or flexibility, your career goals, and if you want to own a place. Read on if you are unsure about what to choose.
Renting vs. Buying Benefits and Drawbacks
Apart from your personal situation, there are some major pros and cons to renting and buying a house in many cases.
Benefits and drawbacks of renting
Benefits
- You don’t pay for maintenance
- You won’t have to incur expensive closing charges
- You have the freedom to move around
- No fluctuation in monthly expenses
- You can try out various living spaces
Drawbacks
- Rent can go up with time
- You don’t have the freedom to customize
- The owner might sell the property or decide not to rent it again
- Restricted sense of permanence
- You won’t be able to build any equity
Benefits and drawbacks of buying
Benefits
- There is a sense of permanence
- You can increase your home value over time
- You can gain tax benefits
- You have the liberty to customize your home to meet your needs
- You can build equity over time
Drawbacks
- The closing cost can be excessive
- Home value might decrease
- Maintenances can cost you time and money
- Less flexibility when it comes to moving
- Tax benefits can be affected by recent tax laws
How to Make a Decision
The ultimate choice you make will be affected by factors like your plans, finances, and your priorities. So, here are steps you should follow when deciding whether to rent or buy a home:
Evaluate your finances
This is the most crucial step you should make when making a decision. You should know whether you can afford to buy or rent a home. Once you have estimated the cost of both options, be candid about if you can afford the fees that come with buying a home, like down payment, moving, repairs, and purchasing new furniture. If you don’t know the option that will match your finances, hire a real estate agent. A real estate agent can help you determine the best option.
Weigh the risks
There are pros and cons to renting and buying a house. And even though you can build equity by purchasing a home, there are some hidden financial risks. For instance, you can lose money in case the value of your property decreases, or if you decide to sell the home sooner than you anticipated, you might not be able to get enough ROI.
On the other hand, renting means you cannot build equity, and you don’t have the liberty to customize the home. Rent can go up, and you are living at the mercy of your landlord. What will happen if they decide to sell the property?
Decide the duration you want to live in the same place
Are you ready to put down roots, or are you looking for flexibility? If you are sure that you want to stay in a place for more than five years, buying a home will make more sense. However, if you are craving flexibility, renting a house is your best option.
Check out your location
When it comes to real estate, location matters more, especially when deciding whether to rent or buy. Therefore, you need to be very familiar with the area you want to live in. Collect data about the area, think of the type of home you want, research the cost, and compare renting and buying fees.
Conclusion
Eventually, deciding to rent or buy depends on you. Renting a home is not always tossing money the wrong way, and buying one is not always a promising venture. Instead, it is about picking what is suitable for you and your personal situation.
