Wouldn’t it be great if deciding whether to buy or rent your residence was as simple as picking heads or tails? It’s not quite that easy when you take everything into consideration.
And there’s lots to consider. Taxes, home improvements, size of the residence…all this and more comes into play.
Here are some additional factors to consider before making your decision:
Renting gives you more freedom to move. Since you’re not locked into a long-term mortgage, you have more flexibility to relocate. This can be a significant advantage in certain situations like when job opportunities in your area dry up, or you receive an enticing work relocation offer.
Tax time favors homeowners. That’s because they can use their mortgage interest and property taxes as deductions.
Renters don’t have to pay closing costs. There are a whole host of fees known as “closing costs” that must be paid when purchasing a home, and they can add up quickly. SmartAsset.com offers a handy Closing Costs Calculator that can help you to estimate how much money would be needed based on home price and location.
Home equity equals greater borrowing power. People can get lower interest rates than average when they use the equity in their home to take out loans for home improvements or even college tuition.
You don’t have to put out a lot of money upfront when renting. When renting, the money that would have been spent on a home down payment can instead be put toward secure, high-yield investments such as Certificates of Deposit (CDs) or high-interest savings accounts.
Renters are at the mercy of annual rent increases. That’s something homeowners with a fixed-rate mortgage don’t have to worry about, although they could be forced to pay higher taxes on a yearly basis.
Homeowners pay more for maintenance. Keeping a house in good shape costs money, and you don’t have the luxury of leaving the landlord to worry about such things as appliance repairs and utility upgrades. While it’s true that renters can indirectly pay for upkeep through periodic rent increases, those costs are usually incurred over a longer period of time and typically spread out among several renters.
Owning a home usually is a great investment. Historically speaking, homes appreciate significantly in value over the years. Once a mortgage is paid off, the return on investment can be extremely profitable.
Renters typically pay less for utilities. Studies show that bills for water, electric and sewage tend to be lower if you’re renting.
Where you live may heavily influence which way to go. For instance, home ownership may be more affordable in the South or Midwest compared to the Northeast or coastal communities.
It’s also important to keep in mind that outside of these factors, there may be emotional or psychological reasons for choosing one lifestyle over the other. But weighing the pros and cons of each option can certainly help in deciding what’s best for you!