Buying vs. Renting – What’s Right for You?

As with many life choices, there are pros and cons to both buying and renting a home. There are financial considerations as well as lifestyle and personal considerations. Deciding what’s right for you at certain stages of life may take some homework.

Pros and Cons of Both

With renting, you have mobility and freedom to move around, your landlord generally pays for most maintenance, and renting does not require expensive closing costs. In addition, there is less fluctuation in monthly housing expenses, and you have the ability to try out a variety of living spaces and locations.

However, when you rent, you also do not build any equity, you have restricted ability to customize your living space, and you have a limited sense of home stability. Furthermore, your rent could go up over time and/or your landlord might decide to sell or stop renting.

When you buy, you build equity, and you may reap tax benefits. You are able to customize your living space, and you have a sense of permanence. If you do move, there is an opportunity to turn your property into a rental, thereby building your real estate portfolio.

On the flip side, closing costs can be prohibitive, and there is the possibility that your home’s value may decrease. With home ownership comes the responsibility, time, cost and effort of maintenance and repairs, and there is less flexibility to move—as well as added difficulty and expense if you do move. 

Lifestyle Considerations

One important factor in deciding whether to buy or rent is how long you plan to stay in the same place. If you feel certain you will be in a home for at least five years, buying a home could make sense. You have time to build equity, put your personal touches on the home, and really make it feel like it is yours. If you are more nomadic, have the possibility of a job change in another area, or are still deciding if you want to grow your family in the next few years, perhaps home ownership is not the best choice at this time. Renting offers the opportunity to test-drive a variety of living spaces, neighborhoods—even cities. With renting comes freedom to move and freedom from the responsibility of maintenance.

Calculate Your Options

Whether you would save more financially by renting or buying can depend on several factors. One is your location and the prices of homes or rentals in that area. Next, you need to consider your credit score and if a lender would find you creditworthy. After factoring in a home’s purchase price, down payment and closing costs, as well as the monthly mortgage cost, compare that to the monthly cost of rent and subsequent assumed costs over a period of time. With this information, you will be able to see the differences between costs as well as the perceived equity you would build up in a home. To aid in your research, you can find free mortgage calculators online as well as free rent vs. buy calculators.

There are financial and personal risks to both renting and buying a home. Take time to weigh financial pros and cons of both, as well as lifestyle benefits of both options. You may be surprised at what you learn, or you may confirm what you already believe. Either way, it is an insightful exercise!

 

Debbie Austin is a realtor associate with Keller Williams, Roseville and has been helping clients buy and sell property in the area for 17 years. If you have a specific real estate question you wish to see addressed, contact Debbie at debbieaustin@kw.com or debbieaustingroup.com.