Renting vs Buying a House: Pros and Cons
Updated: Jan 24
Making the decision on whether to rent vs buy a home can be a difficult one. Everyone's situation is different and there is no clear cut answer to what is right. This blog will look at the five factors that go into this decision and how they all play a role.
1. How long do you plan to stay?
For people who aren’t sure they’ll stay in one spot for more than a few years, such as students or people who just want to try out a new neighborhood, renting could make more sense than buying. However, thinking through your plans and timeline can help you figure out when and what to buy.
2. Do you have enough money saved for a down payment on a home?
The most obvious upfront expense is the down payment. You can often get a conventional mortgage with as little as 3% down.You should also factor closing costs into your upfront expenses. This could include an appraisal, an underwriting fee, a mortgage origination fee, and even a certain amount of property taxes paid at closing. Finally, ask yourself how much you want to have left in savings after closing.
3. Can you afford the added costs of home ownership?
Your calculations shouldn’t stop at comparing rent and mortgage payments, because There are other costs that come with homeownership to consider, such as insurance, property taxes, homeowner’s association fees, and maintenance.
4. Is home ownership really a good investment?
When it comes to real estate, factors like location, the economy, maintenance, and environmental concerns can affect the overall value. Homeowners may benefit from certain tax benefits. Of course, if you rent, you get no mortgage tax deduction at all. Buying a home is a huge part of the American Dream. “One of the biggest ways of building wealth is through homeownership,” says Dr. Vivek Sah, director of the Lied Center for Real Estate at the University of Nevada, Las Vegas.
5. Is it a good time to buy a house?
Private investors are snapping up properties. Boomers are doubling up by buying second houses. And America has been under building for at least a decade. Low inventory can make it more difficult to buy a home, but it doesn't necessarily mean you shouldn't buy. Just know that wish lists might have to be negotiated when there aren't enough properties to begin with. Mark Stapp, a real estate professor at Arizona State University, warns against having "unrealistic expectations." He says buyers need to understand the limits of their budget and "be willing to make trade-offs in size, price, location, or amenities."
We hope this article has helped you to better understand how to know whether to rent vs buy a home, as well as the factors you need to consider as you make your decision. If you would like to discuss the pros and cons of both buying and renting a home, we encourage you to contact us. We are always happy to help, and we look forward to speaking with you soon!
~ Stacy Cate