About 65.9% of people under age 35 rent rather than own their homes. While many people want to own a home, there are advantages to renting instead.
When deciding whether you want to rent or buy a house, there are a lot of different factors to consider. The costs and specific realities of the two options are very different, so you’ll need to make your choice carefully.
Here’s how to decide between renting vs buying a home.
Building Home Equity
One of the advantages of buying a new home is that you’ll be able to build equity in it.
As you pay off the home and as its value goes up, you can capitalize on this equity you build. You’ll have a good chance of selling it for more than you bought it for. While you’ll need to make monthly payments on your mortgage, you’ll be building equity at the same time.
When renting, on the other hand, you won’t build any equity and the money you pay on rent will be gone forever.
Paying Taxes and Fees
While you may have to pay for utilities when renting a home, you’ll be able to avoid many other fees and taxes.
In addition to the fees associated with buying a home, homeowners will need to pay taxes on their property and may need to pay for homeowners insurance as well. Also, homeowners will need to pay to maintain their property and make repairs as necessary, unless they do the work themselves.
With rental properties, you typically won’t need to worry about maintaining your home since this will be the responsibility of your landlord instead.
If you don’t plan to stay in a location for a significant period of time, such as five years or more, then it may be better to rent a home instead of owning it. It can be time-consuming to buy and sell a home when you move.
On the other hand, renting can be much simpler and more straightforward when compared to buying a home. You can move in and out easily and can change locations once your lease is up.
While the costs of mortgage payments could be similar to or even less than the cost of rent in your area, buying a home will usually require a higher upfront payment compared to renting.
When buying a house, you’ll usually need to have a down payment which will be around 20% of the home’s price. While it may be possible to make a lower down payment with certain types of mortgages, in many cases, it will still be a pretty hefty sum.
Rising Rental Costs
Keep in mind that when renting a house, prices can go up over time. Depending on where you live, the landlord can raise the rent significantly as time goes by. This can make the costs more and more difficult to deal with.
Especially when taking out a fixed-rate mortgage, mortgage payments will stay much more consistent and will be easier to handle.
Understanding the Differences Between Renting Vs Buying
If you’re trying to decide between renting vs buying, be sure that you understand the main differences. While there will be fewer fees and maintenance to deal with when renting, buying a home will allow you to build equity and payments may be more consistent.
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