There may come a point in your life when you will need to search for a new home. Finding a new place to live is a huge decision for anyone. During these trying financial times, you will have to choose between rent vs own. You might stop to ask yourself which option is better for you? For obvious reasons, these choices are present because of the cost of owning a home or your ability to finance the new home.
Although, it may seem that owning a home is far better than renting, you still have to consider that owning something as opposed to renting may lead to more expenses. As a result, you should have more money in the bank and more money coming in if you decide own is the victor in the rent vs own scenario.
What are the advantages to buying a new house?
Obviously, owning your own house means you don’t have to worry about paying the rent. All the money that will be spent on the house will be an investment instead of just a monthly expense. It will be considered an asset. and it can be sold in the future.
Also, owning the place where you live gives you more liberty in doing what you want with the house. You can set your own rules, and you have your own limitations. Depending on the location, mortgages in some places cost the same as monthly rent. In these cases, buying a new home is much better since you will own a property in the end as opposed to renting where you need to pay monthly dues as long as you live in the house. Mortgages, however, can be paid off in the future.
What are the disadvantages of buying a new house?
- A new house means a bigger initial cash-out (down payment, transaction cost, agent’s fee etc.)
- Higher monthly cost (mortgages and others). This means you should be more financially ready and capable.
- Owning your own house means more responsibilities, money wise and other aspects. You have to be ready to pay for things like maintenance, insurance and most especially taxes (property tax etc.)
- You have to be ready to stay in the same house for at least two years because moving to another house in less than two years may result in a financial loss when you sell the home. If you sell a house that you own for less than 2 years and you get a profit from it, you will need to pay capital gains taxes. Owning the house lessens flexibility in moving to a new location.
What are the advantages to renting?
Renting as opposed to buying can be ideal if the monthly rent is much lower than the monthly expenses of owning a house (mortgages, insurance and taxes). It is ideal with regards to responsibility too. Renting means lesser responsibility with regards to maintenance. You can also move out anytime without having to deal with selling or leasing the house. You can conveniently relocate faster. However, in some cases, you will need to move out when your lease is up because breaking a lease can be expensive.
You also do not need to worry about paying property taxes and homeowner’s dues. With renting there is less strain on your finances, especially if you are not yet financially stable. When you are renting, you have more time to save for bigger and better home.
What are the disadvantages of renting?
- The monthly payments will not help you own the property.
- You have to abide by the owner’s rules and restrictions.
- There are some cases wherein the monthly rent is more than the average mortgage in your area..
- You may have to pay more each year as landlords often raise rent prices on a yearly basis.
There are always two sides to a story, renting and buying not excluded, and there is a good side and a bad side. Consider your current situation before you decide which path to choose, to rent vs own.
Bottom Line – Which option is more affordable and which one is better for you and for your future?