Buying a home is one of the biggest decisions many of us make in our lives. But how do you know if you should continue renting vs. buying a home?
There are pros and cons to each of these housing options, so it's important to do some research about both to help you decide if renting or buying a home is the right decision for you.
Importance of Housing Decisions
From personal finances to future goals, there are many things to consider when deciding whether renting or buying a home of your own is the best choice. Buying a house is a major life decision and potential homebuyers should evaluate their individual situation to decide what's best for them.
Are you looking to set down roots and stay in an area for a while or does the flexibility to easily move appeal more to you? Do you plan to stay at your current job or are you ready to relocate for another career option? Don't underestimate the importance of housing decisions that you make and how they will affect your life.
And since there is no single right answer, here are some pros and cons of renting vs. buying for you to consider in your decision-making.
Pros of Renting
- No housing repairs. The landlord or management company is responsible for the upkeep and maintenance of the property.
- No big down payment or closing costs are needed.
- More flexibility and freedom to easily move or relocate to different places.
- Do not have to pay property taxes.
Cons of Renting
- Unable to make major customizations to your home while renting.
- The property could be sold or the landlord may decide to move back with little notice.
- No feeling of stability or permanent residence.
- Not building equity in the property because it's owned by someone else.
Pros of Buying
- You have the ability to make any customizations, upgrades, or changes to your home.
- Potential to reap tax benefits each year when you file your income taxes.
- Have a sense of “home” and the stability of a permanent residence.
- Building equity that you can use later with each monthly mortgage payment made.
Cons of Buying
- More difficult and costly to move or relocate to a different area.
- New tax changes are reducing tax benefits for homeowners.
- Down payment and closing costs can add up and reduce your savings.
- As a homeowner, you're responsible for all of the maintenance and repairs.
5 Factors to Consider
When trying to decide if renting vs. buying a home is best for you, here are five things to think about so you can make the right choice for you and your future.
1. Financial Considerations
- Renting Financial Considerations – Sometimes, renting vs. buying is a better option financially because you don't have the added expenses of a down payment, closing costs, insurance, taxes, etc. With homeownership, there may also be needed updates or maintenance repairs that can add up. You need to be financially prepared with savings to cover these expenses.
- Buying Financial Considerations – Buying a home is a great financial move and an excellent way to invest your money, as most homes will increase in value over the years. Not only will your monthly mortgage payment probably cost less than rent on a comparable home, but you're building equity as long as you own it.
2. Lifestyle and Personal Factors
It's important to have a good idea of your goals and plans for the future when deciding whether renting vs. buying is best. If you're just starting out and are not sure where life will take you, think about whether you plan to live in your home for at least 3-5 years. If not, renting may be a better short-term plan.
3. Market Conditions and Location
Real estate and stock market conditions can fluctuate greatly. Research the area where you're thinking of buying a house to see if the market indicates it's a good time to buy a home before committing to purchase. Also, if rental prices are outrageous, buying might be a better option for you.
4. Tax Implications
Being a homeowner gives you tax benefits each year when you file. The deduction of the interest paid on your home mortgage can save you money. However, you will also be responsible for paying the property taxes each year on the home, which can cost thousands. Think about how this will affect your finances to see if tax implications should weigh in your decision of renting vs. buying.
5. Emotional and Psychological Factors
Your financial situation is just one aspect of your choice of renting vs. buying a home. Things like setting down roots near relatives or even raising a family of your own can have a huge influence on your emotions when it comes to buying a home. In addition, permanence and stability can be good for your psychological well-being and are also one of the main reasons people buy homes.
Since there is no definitive answer to whether renting vs. buying a home is best for you, it's important to consider all of these factors and weigh the pros and cons based on your unique lifestyle, income, and future plans to find the best housing situation for your wants and needs.
If you decide owning a home is the best option for you, our Mortgage Services Department offers a complete suite of mortgage products to fit your life. Our team of experts is here to help you every step of the way. Get pre-approved or if you have questions, contact us today!
