As 2021 unfolds ahead of us, we all wonder whether it is suitable to buy or rent a house. It is natural to feel overwhelmed by the indecision of renting vs buying/owning a house debate. Though both sides have strong points, it entirely depends on ones’ personal choice. Your financial choice may not appeal to someone else. Moreover, buying or renting a house has many other factors that need to be considered, such as personal readiness, housing preferences and needs, financial willingness, the real estate market, etc.
Many people believe that it is clever to buy a house rather than renting one. However, it is the opposite that benefits individuals. Both; renting and buying have their pros and cons. Thus it is important to make your decision wisely after keeping in mind considerable factors important to you.
Renting is mainly taken as a stigma of being “a huge waste of money.” But to tell you, the truth is there are times when renting a house makes financial sense since it comes with low, upfront cost alongside other flexible aspects.
On the contrary, buying a house is an expensive investment that most people think. Hence, it is financially sensible to rent a house if you can’t afford to buy one.
Pros of renting
Renting costs less money. Renting is cheaper than buying a house simply because purchasing a house requires high upfront costs. When renting a house, the total amount (including the security deposit) is much less than the down payment required for buying a house. Typically, a 20% down payment is needed to buy a house. Furthermore, buying a house comes with other expenditures such as property taxes, home inspection, insurance premiums, etc. if your savings are not enough to buy a house, it is better that you opt for renting one.
Renters are advantaged since they do not have to take care of certain things compared to the home buyer, such as repair bills, etc., the landlord is responsible for these tasks. As a renter, you know how much you will be spending at the end of the month, making your budget run smoothly.
When you own a house, you must keep your house in good shape. However, renters don’t need to deal with the maintenance of the house since the property owner deals with it. So, when renting a house, maintenance costs and repairs bills are not your responsibility.
Another advantage is that you are free from paying property taxes which, let’s face it, is a financial burden.
Renting is a cheaper option than buying a home, especially in places where there are high prices. In such areas, it is nearly impossible to buy a house because of the high market price. Hence, renting a house that is not affordable to own a property is a wise move.
Rental prices are less than mortgage payments. If you don’t have enough savings to pay a 20% down payment, then there is no point in buying a house. This is why renting a house seems to be an attractive option instead of buying a house.
Another pro of renting a house is that it becomes easier to pack and move out if there is a better housing option near you. Having a mortgage is makes it very difficult to move since you have to take care of property matters first. On the other hand, a homeowner has to find a buyer first to buy their property.
If you are a renter, you only need to provide the owner with the required amount of notice and prepare to move out. This makes renting a better option for people who don’t plan on staying at one place for the long term.
Cons of renting
You are not building equity:
When you rent a house, you are not building your equity. When you move out of your rented house, you only take the things that belong to you. Whereas when buying a house, you as an owner build your equity which is a long-term investment.
Some property owners/ landlords ignore the repairs that are needed. Repairs such as leakage, sewer line problems, AC breakdown, etc., make a challenging environment for living.
Being a tenant, the property owner decides how much you have to pay him rent. Your landlord may increase the rental price by the time your agreement comes up for renewal.
Restrictions on renovations:
A drawback of renting a house is that you have to follow specific rules laid out by the property owner in the rental agreement. This limits your freedom to use the property. Thus, you can’t change the property according to your preferences or requirements. For instance, some apartments have a “No Pets” policy.
Pros of buying
Buying a house gives you a sense of financial stability. Having your property means that you are not accountable to meet the deadlines of paying rent, you don’t have to move out of your owned property, and you don’t have to worry about the increment of monthly rent. Even buying a house instalment is a suitable option because the monthly or quarterly instalment remains the same.
If you want to start a family, buying a house is a wise idea. You can always start from a smaller place and make your way towards a bigger house once you have saved enough.
Opportunity to generate income:
Owning a house is a great way to make income by putting it for rent. If you have extra space, you should rent it out and earn extra cash while maintaining ownership.
Buying a house is a considerable investment. Despite being a massive financial decision that has its advantages, it also provides a sense of empowerment.
If you own a house, you do not have to deal with third parties or landlords. You are free to make your own decisions about your house. If you wish to move, you can sell the property and buy another one.
Cons of buying
Requires substantial savings:
Though it may seem easy to buy a house, it is essential to remember that buying a house requires a hefty amount of money. Whether it is instalments or paying a mortgage, you still need to pay at least 20% of the entire cost as a down payment.
Not just that, there is a lot of paperwork when buying a house as compared to renting one, such as sales deed, change of ownership, property insurance, and many other. Moreover, the owner of the house has to pay property tax.
The value of a house or a building decreases over time for many reasons, such as old construction style, outdated layouts, wear, tear, etc. Thus, to flip the house for profit, you need to invest money and time for upgrading it. Moreover, the location of your property also plays a vital role since the value of the property located in popular areas doesn’t decrease compared to other areas.
Cost of maintenance and repairs:
Owning a house isn’t just that; it comes with many responsibilities. Even if you buy a new house or an old one, you are bound to pay maintenance costs whatsoever in the first months of purchasing a house.
From pipe leaks to light fixtures, homeowners have to maintain all these repairs by themselves.
Buying a house has less flexibility in terms of job hunting. If you own a house, you can’t explore new job opportunities in different cities. Renters can quickly move out by giving their landlord a notice whereas, the homeowners have to go through a detailed procedure to put their house up for sale. They also have to be patient for a buyer to visit their property and then negotiate the price before making a final decision. This is a long process that takes a few months.
To conclude, both; renting vs buying a house have their advantages and disadvantages. Keeping in mind your financial situation, you can always make the right choice. However, it is not just about the money. You also need to analyze your personal goals while deciding to buy or rent a house.