Most people decide to move from renting to owning due to a life change such as relocation, a new job, someone is moving into or out of your current living situation, a new baby is on the way, marriage. No matter what life stage you are in, there are a lot of things to consider when deciding to move from renting to buying a new home, as homeownership can have both its advantages and disadvantages. Before you take the plunge into either option, consider the rent vs. own pros and cons.
Renting vs. Owning a Home: Pros & Cons
- Potential tax benefits
- Putting down roots
- Building equity
- Personalizing décor and landscaping
- Flexibility to make home improvements
- Mortgage payments are typically stable
- A place to call your own
- Financial responsibility for all maintenance and repairs
- The commitment to the property is typically longer than renting
- Property taxes can be costly
- Property values can fall resulting in a loss from your investment
- Landlord may handle all repairs
- Access to fitness center, pools, and other amenities
- Renters insurance is less expensive than homeowner’s insurance
- Utility costs can be lower
- Moving from a rental situation may be easier than selling a home
- No tax incentives
- Housing costs can increase
- No equity being built
- Property upgrades are limited
- Little control over availability of housing between leases
Rent vs. Buy FAQs:
Is Renting a Waste of Money?
Renting may be a waste of money if you’re confident that you want to live in a certain area for years to come and have enough money saved for a down payment. Otherwise, renting makes sense for most people until they’ve accomplished those two things.
Is Renting a Bad Idea?
Renting to own may make sense for some situations but ultimately, if you’re certain that you want to own a house at the start of the relationship, you’re better off purchasing the home in the first place.
Is Renting Forever a Good Idea?
Renting for your whole life has its pros and cons. If you’re the kind of person who likes to move a lot and doesn’t want to be tied down by property ownership, then renting is a great option for you. However, if you’re expecting to live in one area for many years then purchasing a home may make the most sense for you. Once you pay off your home you won’t have a monthly housing bill.
Isn't Renting Cheaper Than Owning a Home?
Many renters think that they just can't afford a new home. They are pleasantly surprised to find that a house payment is very comparable to their monthly rent, when considering the after tax equivalent. Initially, most of a new house payment is made up of principal, mortgage interest and real estate taxes (up to 90% of the monthly payment is some cases).Since these are tax deductible, the actual cost of the after tax equivalent mortgage payment is much less than you think. The exact amount is determined by your specific tax situation. In some cases, you can also take advantage of falling interest rates for lower monthly mortgage payments.
So, Which Option is Best for You?
Nearly all of us pay a monthly housing payment. Some pay a landlord, others pay a mortgage company. In both cases that payment is building equity in the place where you live. The question is, whose equity are you building? Equity for you and your family, or for your landlord?
The benefits of owning a home vs. renting depend on your unique lifestyle needs and goals. For example, if you’re craving a place to decorate, renovate, or otherwise personalize, homeownership may be right for you. Conversely, if you’re not ready to take on the responsibility of maintaining a home, perhaps renting is the right choice.
Ultimately, whether you rent or buy will come down to what is right for you in your current life stage. At Shea Homes, we know this next step is not an easy one—that’s why we’ve created useful homebuying tools like our eBook to the homebuying journey, affording your dream home’s down payment, and checklists to decide what you want vs. what you need in a new home. You can also review our handy infographic on the pros and cons of renting vs. owning your home.
Still have questions? Feel free to reach out to us on our social channels or contact us through interest form, calling or chatting us and we’ll be happy to support you in your journey to homeownership.