At some point, we all move. Whether it be a job change or a growing family, moving from one place to another is part of life. If you’re in that place right now, you may be wondering whether or not you should rent or buy.
Buying a house and renting a house are both great options for the right people. So how do you know what’s best for you?
To help you out, we compared the basics of buying and renting. This information is for general informational purposes, and should not be used as your sole source of guidance. For a decision as major as a new home (whether purchased or leased), we highly encourage you to do your research and enlist the help of a professional real estate agent.
Buying a house is exactly what it sounds like: you own the house. It’s your name, your address, and your responsibility.
One major perk of buying a home is that the mortgage you pay every month is going towards something that you will one day own outright. If you rent, you could be paying the same amount per month that you would on a loan payment, but at the end of the day (or thirty years), you still won’t own anything.
Other perks of owning a home are tax advantages and capitalizing on appreciation. So basically, you can deduct several costs from your tax return, and cash in on appreciation if or when you decide to sell.
Are you prepared to buy?
While home ownership may sound like a dream come true, it’s not an easy burden. Home ownership comes with more expenses and a great deal more financial responsibility.
That said, it’s important to honestly assess your situation. If you can confidently answer “yes” to these four questions, you might be ready:
- Are you out of debt? Having any sort of debt (student loans, credit card debt, anything) is a hardship in and of itself. It’s like a weight on your shoulders, a past responsibility that you can’t shake. It likely isn’t wise to add yet another debt onto that. Besides, mortgage lenders will be less willing to lend to you if they believe you’re hands are too full with other debts.
- Do you have an emergency savings? Are your prepared to go three to six months without an income? Do you have enough saved up that you could pay all of your bills for a few months, if for some reason you got laid off or experienced a pay cut?
- Do you have enough for the down payment? In most cases, you’ll be asked to put down 10-20% of the sale price. You might be able to make the monthly payments, but if you can’t make that initial down payment, you won’t be going anywhere.
- Do you plan on being in this location for a while (as in several years?) The answer to this question is probably yes, if buying a house is in the realm of possibilities for you. Buying a house is a long-term investment. If you don’t plan on staying there long, don’t tie yourself to a house.
To put it simply, renting means you’re paying to live somewhere. It’s not an investment like home ownership, but it has several benefits.
The biggest benefit is the flexibility. If you don’t like the place or the city, you can go somewhere else when your contract is up. Leases are typically a year. When the year ends, go somewhere else! You’re not bound to the property, like you would be to a house.
Another great benefit is that there are less costs. Unlike buying a house, you don’t have to worry about closing costs, HOA fees, flood insurance, etc. You mostly just have to worry about your security deposit, monthly payments, and renter’s insurance.
Is renting the best option for you?
Home ownership has always been heralded as the ultimate goal; the material way to say “I’ve made it.” It’s an investment, unlike renting, which some argue is “a waste of money” because you aren’t getting anything at the end of our time there.
When it comes to buying a house, we posed four questions. If you answered “yes” to all four, you were likely prepared to buy.
But if you answered “no”? That probably means renting is the better option. To break it down, if you:
- are in debt
- are moving around frequently or don’t want to commit to one location
- don’t have a large savings
- don’t have the money for a down payment or major purchase
…then renting is probably a great option.
Still on the fence? That’s understandable. Getting your own place– whether buying or renting– is a huge decision. To help out even more, try a Rent vs. Buy Calculator, like this one, and/or call up a real estate agent!
With each closed transaction, Pure Realty agents donate to an organization that aids in the effort to provide clean water to impoverished children and families around the world. Pure Realty matches 100% of agent donations.