There are a lot of things that you should consider if you should start looking into buying a home, versus renting as it’s a decision that can change your life. Once you buy your own home, there are new responsibilities like the insurance costs and the taxes that you did not have while renting. You’re also responsible for repairs and keeping up with payments on the house no matter your financial situation is at the time.
You’ve got to consider your budget, the lifestyle that you want to lead, how long you want to live in the property and the potential tax deductions when making the decision to buy vs rent.
When considering what is more affordable – renting or buying – it can help to weigh all the pros and cons of both. It’s a decision that requires some careful consideration and we’ve put together a guide to help steer you in the right direction.
Renting a Home
Renting a house can be considerably cheaper than buying a home. Costs are more condensed, and the upfront costs differ from a purchase. You pay a refundable security deposit and possible fees if you use a broker to rent a home, then there are the monthly lease costs and your renter’s insurance.
Here are some of the “pros” of renting:
- Renting involves less risk as you’re not responsible for home repairs.
- Smaller initial payout – rental deposits are far less than house down payments.
- If you need to leave, you don’t have to sell a house, and you can go as soon as the lease ends.
- Zero property tax
- In some rental homes, the utilities are included in the rental costs.
- The credit requirements to rent are not as stringent as buying
As with anything, though, renting does have its cons. While lack of responsibility is listed as a pro, it can also cause contention with an unresponsive landlord or a landlord that is a little too interested in what you’re doing in the property. With a purchase, you don’t have that interference.
Here are some of the ‘cons’ of renting:
- You will constantly hear the phrase, ‘money down the drain’ because you are paying someone else’s mortgage when you could be paying for your own.
- Your landlord or agency doesn’t need to give you much notice before asking you to leave, which could leave you in a bind if you don’t have the right amount of savings put by to rent again.
- Dealing with a landlord isn’t always easy.
- If there are repairs or issues, you have to wait around for these to be done. You could do them yourself at your own risk and cost, but you may have issues getting that money back from your landlord.
- As you pay into the rental, you don’t build any equity or future in it.
- Your credit history doesn’t strengthen.
- You have to run all the changes you want to make past the landlord, which can cause some disruption if they do not agree to any changes
- Your rental prices can go up without too much warning.
Ultimately, your decision to rent over buying is going to come down to your financial standing and life circumstances. Some people prefer to rent their home rather than look at buying, as they’re not interested in staying somewhere long term. This is where you have to consider your lifestyle. If you are adventures and prefer to be exploring and experiencing as many opportunities as possible, you may not want to put down roots and buy a home. This is where renting could be better for you.
Buying a Home
There are some people out there that save to be able to afford the costs associated with buying their first property.
Buying a house is an achievement that many strive for. It’s a tangible asset, which makes it a great place to invest funds, and it’s a good investment to be able to give your children one day if you choose to do so.
Here are some of the pros of buying a new home:
- When you choose to buy a new home, you’re able to build equity that you can later take out to renovate or re-buy elsewhere. You can also steadily build your credit when you make regular payments on time.
- When you decide that you want to sell one day – if you decide to go that route – you could make a nice profit and have some money to put back into savings.
- You could choose to rent out your property and become a landlord. This could prove profitable and help you to build a portfolio of properties.
- The tax benefits through the write-offs and deductions could be massive for you.
- If you choose to one day refinance, you could pay less interest and lower your monthly repayments.
- The decor and renovations and all up to you. Any changes you want to stamp across the home are all on you, and you get the full creative license over these.
- A house is an investment in your future
- If you want to have a pet, you don’t need the approval of a landlord to do so.
- It’s an ‘achievement unlocked’ moment, and one to celebrate.
- In the same way renting has cons, buying does, too. There are plenty of reasons (evident from the list above) to buy your property, but what are the risks that you should be thinking about?
Here are some of the cons of buying a new home:
- All the repairs and maintenance that you get away without paying on rental are now in your hands. Without good savings account to back you up, this could prove to be a problem when you have to repair appliances.
- If you do happen to miss repayments on your house, you could take hits on your credit or even up losing your home.
- Investing in a house is a long-term commitment, one that you have to be prepared for from the off.
- If you need to move to a new area, selling a house can become a hassle. There is a lot more involved compared to moving into and out of a rental.
The costs that you have to consider when you buy a home do vary, and they do include more than the deposit on the house. Consider the fact that you need to have savings for appraisal fees, inspection fees, lender’s fees, title fees and home insurance for the first year.
You can weigh the pros and cons and discuss your options, but when it comes down to it, it’s going to depend on your financial situation and your lifestyle as to which way you will go. You need to consider whether you can afford either option. Using our rent vs purchase calculators can help you to make a decision based on your financial situation. You can then do more research on mortgages before you make your final decision.