Owning your own home is often described as The American Dream. Unfortunately, due to individual circumstances like your financial situation and factors out of your control like the housing market, owning a home may not happen right away.
Instead, many people opt to rent a home in the meantime. But is this the right choice for you? Here are the pros and cons of renting a home versus buying a home.
Pros Of Buying A Home
You will build equity by buying a home, which is your accumulated interest in the home that is increased whenever you pay your monthly mortgage payments and make improvements on the home. You can also customize your home to your liking, renovating rooms as you see fit without the limitations set upon you by a landlord.
Pros Of Renting A Home
Renting a home is a good choice if you are not planning on staying there for more than five years. For example, you are in school or temporarily in the area for a job.
By renting a home, you can also potentially save money for your own home later on down the road since you do not have to pay property taxes, and sometimes the landlord may pay for maintaining and repairing the home. If you are very lucky, they may even pay for certain utilities like trash.
Cons Of Buying A Home
Buying a home is expensive. You will need to have enough money for things like down payment, PMI, property taxes, and insurance among other things. You will also need to maintain and repair the home yourself, which can be expensive if something breaks. So before you buy a home, make sure it is thoroughly inspected and needed repairs have been completed.
When you purchase your own home, you also have less flexibility if you need to get up and move all of a sudden, say for a job. Depending on the market and time of year, it may be difficult to sell on short notice for the amount it is worth.
Cons Of Renting A Home
When you rent a home, you will have to live by a set of rules put forth by the owner. Depending on the landlord, you may not be allowed to have pets, long term guests, or make changes to the home like changing the color of the living room. Unlike a fixed-rate mortgage, your monthly rent payments can increase at the discretion of the home’s owner.
Taking a homeowner’s education course and talking to your financial advisor is an excellent way to help you determine if purchasing a home is right for you.