The common assumption is that owning a home is more financially astute than renting in the long run. But this isn’t the case for everyone. There are plenty of other factors that come into play when making your final decision, such as your employment status, financial status, and relationship status. Depending on your living situation, buying and renting a home have their benefits and drawbacks. The following are some things to take into consideration when deciding which option is best for you.
Are you financially capable, or do you need more time to save up?
Purchasing a house is often regarded as the most financially sound decision in the long run. That is true if you’re planning to stay in one area for a long period. You can build equity this way as well as receive tax benefits along with the safety and security of a permanent residence. All the money you put into your home can come back to you in the future should you decide to sell or rent it.
However, there are plenty of fees associated with buying a house that could run you up a hefty bill. That includes closing costs, furniture, moving costs, a down payment, insurance, association fees, and general home maintenance costs. Even if you can afford a mortgage payment, and there are still options for mortgage refinancing down the line, your regular expenses can add up.
Renting is often a cheaper option compared to buying since there are fewer upfront costs involved. The list of financial obligations that come with renting is short and manageable. It includes the rental fee, parking fee (if you own a car), utilities, and renters insurance. You’re also not responsible for maintenance or repairs since your landlord usually handles them. That gives you more time to save up for big purchases or pay off debt.
On the other hand, what you spend on rent money, you’ll never get back. Unlike purchasing a house, you can’t build equity no matter how much money you put into your rental. Furthermore, your landlord has the final say when it comes to rent price increases and leasing periods, and you don’t receive any federal tax benefits, which may affect your annual federal tax liability.
Do you need flexibility, or are you ready to settle down?
If you’re intent on laying down your roots in a particular community, then buying a house makes sense. Homeownership is usually suited to someone with a stable job who is looking to or has started their own family. With a family to keep in mind, there’s more that ties you down to a single location than someone who isn’t looking to settle down any time soon.
However, if you’re not committed to any serious career or interpersonal relationships, then the flexibility of renting will suit you. Renting will allow you to pack up your things and move to a new city or country for a promotion or simply for pleasure without any troubles.
With these in mind, it’ll be much easier to decide whether you’re ready to become a homeowner or if your current living situation is more suited to renting. Weigh the risks and benefits associated with each and decide which one works for you.