Deciding to rent or own a home can be quite the conundrum for anyone.
Maybe you are a young and single professional with your first salaried job, or maybe you have a family of four moving to a new state. Perhaps you need a place for just you and your partner, but you might be expecting a need for extra space in a year or two. Or, maybe you just want a change of scenery.
No matter the reason for a move, knowing your options and reasons for renting or buying your next home can make a world of difference in both the short and long term.
The options are fairly straightforward: you can rent an apartment or house, usually with a security deposit and monthly rent payments; or you can buy a condo or house, usually with a down payment, loan and monthly mortgage payments.
Leslye Helton, a real estate agent with Raleigh United Real Estate, said there are a number of helpful questions to consider when deciding to rent or buy, including:
- What is the price of the home?
- How long do you plan to stay?
- What would your monthly payments be?
- What does your income look like going forward?
- Along with the mortgage, can you afford maintenance or other incidental costs often attributed to owning a home?
Helton said she doesn’t believe there is a unanimous "better" choice between renting and owning.
"Each person’s situation is unique and there is no one-size-fits-all when it comes to renting versus buying," Helton said. "If you are only going to be in an area for a couple of years, the market appreciation rate may not be enough to make it worth your time to buy."
She added, "There are lots of costs associated with home ownership and you should see if the expenses justify the decision."
Renting is an obvious first-step for recent graduates, and it can also be a smart short-term decision for almost anyone in the right situation.
With renting, the comfort of having a 12-month lease as opposed to a 30-year mortgage can be attractive. But one of the biggest benefits of renting is the lack of financial responsibility.
With renting, you are not responsible for repairs or maintenance -- good luck getting your porch power-washed or the plumbing fixed for free if you own your home.
Renting in some areas also comes with amenities such as laundry facilities, fitness and family areas, and maybe even an in-ground pool that someone else cleans.
Of course, renting definitely has its drawbacks.
For example, there is very little freedom in regard to personalizing a property, and many rental properties either do not allow pets or charge a non-refundable fee for them.
In a section of its website aimed at helping first time homebuyers, Bank of America points out that renting also doesn’t offer any tax breaks, nor does it offer equity or long-term stability. Essentially renters cannot control anything beyond their lease. And once the lease is up, rent can be increased, and in some extreme cases, renters can be asked or forced to leave.
Buying a home comes with much greater responsibility than renting, and with more up-front costs.
Helton pointed out that as the homeowner, you are your own landlord. So, if you're a first-time homebuyer, be sure you can afford what you'll need to keep your home in good shape; lawn mowers, ladders, tool sets -- these don’t come with the deed.
Another up-front cost to be ready for is the down payment. If you want a favorable interest rate, you need a smaller loan amount, and the best way to have a smaller loan amount is with a larger down payment. A high interest rate over 30 years can be crippling, so definitely take into account the ability to make a good down payment.
Home ownership also provides the ultimate freedom -- the home is yours. Want that wall down? Take it down. Have as many pets as the city will allow you to have. Add a porch or have a garden if you want. Home Ownership allows you to customize the home to your desires; it doesn’t force you to accept someone else’s design.
Of course, there are financial benefits as well. Bank of America explains that homeownership provides a healthy tax break and offers the opportunity to build equity in the home and strong credit by making payments on time. You can make money as the home appreciates by doing nothing more than simply owning and maintaining your home.
No matter what direction you go, the most important thing to do is what works for your situation. Being aware of your needs and expectations will help your next step be a confident one.