Choosing between renting and buying is a significant decision that will impact your lifestyle and finances. Are you still debating whether or not to purchase a home? Or will you continue to rent to save money on maintenance and have the freedom to move? Both have advantages and disadvantages. How they differ may be determined by your financial circumstances and objectives. Let’s weigh the benefits and disadvantages.
When it comes to wealth, we must first determine who is benefiting from our efforts.
Rent: You only help your Landlord gain wealth. There is a lack of equity.
Own: You create your own wealth. There’s equity accumulation, assuming that the home's value does not decrease. And maybe in the future, you can either rent that home out or sell it for a profit.
Another aspect we consider is the payment. This is where we should choose which financial option is the best for us.
Rent: Your rent payment will almost certainly increase. Rent, fees, and a security deposit are all likely to be paid. Less paperwork and upfront fees. You don't have any property tax bills, thus you don't get any tax benefits.
Own: You will most likely be required to pay a down payment (Deposit) as well as closing charges. Money and documents are necessary. In the early years of a long-term mortgage, mortgage interest can make up nearly all of your monthly payments. With homeownership, your home may qualify for tax incentives. But one of the biggest positive aspects is, that the monthly payment goes to YOU OWNING the home, not to a landlord.
If you enjoy decorating and personalizing, renting versus buying is a major difference.
Rent: While you may have fewer options for personalizing your house, some may have amenities such as a pool, gym, or lounge room. The landlord is responsible for the upkeep, maintenance, and any improvements to the property.
Own: You have the freedom to personalize and update your home as you see fit. With freedom comes responsibility, so you are responsible for costs associated with home improvements.
Do you need cash your extra money to be immediately available?
Rent: Homes aren’t the only investment out there. Cash can go into more liquid asset holdings and be available during uncertain times. You will have the freedom to do what you want with it.
Own: If you’re like most people, money that is readily available is more likely to go to less valuable investments. In this market you may be able to cash out from your home in less than six months, most likely taking a financial hit during the first 3-5 years. You can always rent it out to free yourself from monthly mortgage payments. People can expect to break even.
Owning a home can be advantageous to owners considering the amount of equity they accumulate in their home. Renting, on the other hand, may be a preferable alternative for people who want to escape the inconveniences of homeownership, such as maintenance bills and property taxes. Still, it depends on the person's lifestyle, financial state, and whether or not they are working or retired.
Still unsure if renting or purchasing is the better option for you? For more expert advice, please feel free to contact us right away.