Renting or Owning, What Is Better for You?

In a real estate market where home prices are rising, many havebegun to reexamine the idea of buying a home, choosing instead, torent for a while. But often, there is a dilemma: should you keeppaying rent, knowing that rent is rising too, or should you lock inyour housing cost and buy a home?

Let’s look at bothscenarios and analyze the pros and cons ofeach:

Renting

With the housing market crash in 2008, many homeowners losttheir homes and became renters. According to Iproperty Management,“the number of households renting their home …rose from 31.2% of households in 2006 to 36.6% in2016”.

Some choose to rent because it is more convenient for theirlifestyle. Those whose job requires frequent moves need theflexibility that a 6-12 month lease agreement gives them so theycan move to their next assignment!

Many renters believe that renting is cheaper because they do nothave to pay for maintenance and repairs. (Not true!Landlords work those expenses into your rent and other fees).Another reason many rent is that they feel like they cannot affordthe down payment and closing costs required to buy a house, due totheir inability to save much after paying their monthlyexpenses.

That can be true! Nearly 1 in 4renters spend at least half their household income onrent. In 2017 the “severely” burdenedrenters’ rate was 24.7% with 24.9% reporting they were“moderately” burdened.

Renting also brings some financial disadvantages. Homeowners cantake advantage of tax deductions that let them claim their propertytaxes and mortgage interest. Additionally, there is a big risk thatyour rent will go up every time you renew your lease, as we knowthe median asking rent has been increased steadily since1988!

One of the major challenges with renting is that you don’thave a space to call your own. When you rent, you are paying yourlandlord’s mortgage, and therefore they are the beneficiariesof the equity gained from paying that mortgage.

Now let’s explore the other side:Homeownership

In the past, we have mentioned the many financial andnon-financial benefits of becoming a homeowner. So,let’s just focus on the one big difference between rentingand owning, the ability to lock in your housingcost!

Assuming you will have a fixed-rate mortgage, your costs arepredictable! You will know exactly what your mortgage payment willbe for the next 15-30 years. The homeownership rate in 2018was 64.4%, andhas been on the rise. Those households locked in their housing costrather than wait for their landlord to raise their rent again!

What are the disadvantages of owning a home? Well, it is along-term financial commitment! It is not easy to pack quickly andmove. You will need time and good planning to do it in a shortamount of time.

You need to save your money! Getting a mortgage requiresa down payment, closing costs, and moving expenses. Again,that will require some savings and planning!

Unless you have a homeowner’s association (HOA) (and youpay an HOA fee) or a home warranty, you will be responsible formaintenance and taking care of the home. This may range anywherefrom regular landscaping to major repairs.

Bottom Line

Like everything in life, there are pros and cons. What is betterfor you depends on your situation! If you are interested inbecoming a homeowner and want to discuss the pros and cons,let’s get together to help you review your current situationand answer any questions you may have!