Not sure whether to rent or purchase a home? Check out our list of potential advantages and disadvantages to each option below:
Advantages of Renting
§ Possibly less expensive than a mortgage payment
§ No mortgage insurance, as with FHA mortgage loans (renter’s insurance optional)
§ Less maintenance and repair costs, if any
§ No large down payment required- just security deposit (usually one month’s rent)
§ No property taxes
§ Freedom to relocate if and when necessary
§ No risk of depreciation of home value
§ Utilities sometimes included in rent amount
§ Pool, gym, security, and other amenities often included
§ Freedom to use money toward other profitable investments
§ No risk of foreclosure
§ Bottom line: Less stress!
Disadvantages of Renting
§ Many pet restrictions (often not permitted in rentals)
§ Monthly rent may exceed monthly mortgage payment
§ No ownership or wealth creation
§ Rent likely increases over time
§ Must answer to a landlord or real estate management company
§ No tax benefits
§ Rules, regulations, and limitations outlined in lease must be followed
§ Temporary housing (less stability)
§ May not be allowed to make changes and decisions about property’s aesthetic and function
§ Lease may not be renewed- at discretion of property owner
Advantages of Home Ownership
§ Ability to build home equity and wealth
§ Pride and status- ability to say you own a home
§ Tax deductions
§ Not required to follow a landlord’s rules
§ Cannot be evicted
§ Ability to keep pets in home
§ Ability to make changes, remodel, or expand
§ More stability/permanence- potentially better for children and family
§ Mortgage can improve your credit
§ Ability to borrow against your property via HELOC or cash-out
§ End to monthly mortgage payments, once your home is paid off
§ Fixed payments, if you select a fixed mortgage
§ Mortgages are the cheapest type of loans available
§ Can partially exclude capital gains when you sell the property
§ Inflation hedge
§ Ability to rent out to others for a profit
§ Can sell and use proceeds for a home upgrade
Disadvantages of Home Ownership
§ Home could potentially lose value
§ Possibility of overpaying for property
§ Long-term commitment
§ Difficulty of relocating should you dislike the home or location after purchase
§ Obtaining a mortgage and locating a home is time consuming and sometimes difficult
§ May not qualify for a mortgage
§ Mandatory real estate taxes
§ Mandatory homeowners’ insurance for FHA loans
§ Housing payments could ultimately be more expensive
§ Mortgage payment can rise with ARM loan
§ Large down payment often required
§ You’re responsible for all maintenance and repairs
§ HOA dues
§ Added liability and responsibility
§ Transaction and closing costs for buying and selling
§ Taxes and insurance typically increase over time
§ Your home can be damaged and destroyed (costly, if not fully insured)
§ Ability to be foreclosed on and lose your home
Ultimately, there’s a tradeoff, whether you rent or buy your home. It is a decision often based on family dynamic, work, location, and personal preference. Contact us for any questions you have concerning home ownership or renting requirements!
