Buying vs. Renting a Home
A house is not just a place to live, but a valuable asset for future generations. For countless Americans, buying a home is a significant goal in life. In fact, owner-occupied housing units make up 59% of the total housing units.
For others, the cost of owning a house is so high, that they would prefer renting a home. So, is it better to lease or own a home? When deciding whether to go with buying vs renting, there are a couple of factors to consider. Such as finances, lifestyle, and personal goals.
You should weigh out the costs and benefits of your savings, income, and moving habits. Check the guide below to find out more.
Factors That Affect Buying vs. Renting a Home
Do you live in an expensive city? Is it worth it to keep renting? The location has a major role to play in deciding whether you will be buying vs. renting a home. Location affects the price of the home.
Taxes, property values, and the high cost of living in hot markets such as New York, Los Angeles, and San Francisco drive home ownership costs. Here are the factors you should assess when looking to buy or rent a home.
If you plan on buying a home, you need to evaluate your financial readiness. You will need a good credit history if you need a loan, a large down payment, and the ability to make mortgage payments every month. There are other costs that come with owning. Such as maintenance, insurance, utilities, and HOA fees.
Renting has better upfront flexibility with your finances, mainly because of the smaller deposit. Although when renting a home, you get a shorter-term commitment, there are no property taxes, and you have fewer unexpected costs.
Buying a home can bring an inevitable change to your current lifestyle. If you plan to move a lot, or you are not certain where you want to live in the long run, then renting can be a better alternative. But, if you already have a solid career and want to make use of your financial benefits, then owning a home can give you stability and satisfaction.
Do you want to expand the family or go back to school? When you are renting a home, you can explore different areas and relocate when you see fit. But, if you want a housing unit that can accommodate a growing family in a specific location, then buying a home can be a more practical alternative.
What It Means to Buy a Home
Buying a home can be the biggest purchase you make. It means securing finances, finding the property, making an offer, and closing a deal.
Some benefits renting doesn’t have, but buying a house does have are:
- Stability – Owning a house gives a sense of permanence. You have a place you can call your own.
- Pride of ownership – You can involve yourself with your local community. Many homeowners take pride in their community.
- Tax deductions – You will be facing property taxes at a local and state level. If you are married and filing separately or single, you can deduct up to $5,000 of property taxes. Or $10,000, for a married couple that files jointly. Even though the property tax deduction can vary based on your location, it is still a useful feature for homeowners.
- Equity – Building home equity increases the money you stash away in assets and reduces your debt.
Owning does not guarantee you will build wealth in the long run. You should take control of your finances rather than rely on fluctuating home values.
What It Means to Rent a Home
Renting a home means you are temporarily using the property owned by another, and you have an agreement where you need to make payments.
Some benefits renting has over owning:
- Flexibility – You can change the neighborhood or city whenever you want. You can choose to move for love, work, school, family, or just because you want to.
- Predictable monthly expenses – You can better manage your monthly housing costs because you don’t have to worry about renovation or maintenance.
- Someone will handle repairs for you – The landlord should be and is required by law through your lease agreement to fix the damages at no cost to the tenant.
Renting does not mean you’re wasting your money every month. In over 75% of the biggest 50 markets in the United States, renting is more affordable than purchasing a starter home.
The Key Difference Between Buying vs. Renting
If you are weighing out the pros and cons of buying vs renting a home, then you should take a look at the major difference between them.
- Property values – As a homeowner, you can capitalize on your equity, which can accumulate over time. If the value of your home goes up, you can earn more by selling it. You also have a fixed-rate mortgage. With rising rents, on the other hand, there are fluctuating monthly payments. So, when you rent, you build your landlord’s wealth.
- Tax benefits – By buying a home, you can use multiple deductions and tax credits. Such as SALT deduction, mortgage interest deduction, and decrease your tax bills. Renting is an ongoing expense.
- Repairs and maintenance – As a homeowner, you can upgrade your home however you like. But, every year, you will have to set some of your budgets aside to spend on repairs and maintenance. When you are renting a home, the landlord covers the repairs.
- Time commitment – Buying a house is often a long-term commitment, ideal for improving a sense of family stability. Renting gives you better short-term flexibility. It is easier to move or adjust the size of the home.
When you make plans for buying or renting, you should take all of these factors into account, and Midwestern Realty can set you on the right track with whatever you decide.
Contact Us Today
At Midwestern Realty, we specialize in commercial, agricultural, residential, and lakefront properties. Our goal is to guide you every step of the way of selling or buying real estate. Our team of skilled real estate agents has years of experience and can offer expert guidance. Schedule a consultation at (517) 278-6400 or contact us today online.