The choice between buying a home and renting one can seem daunting, especially in South Florida where everything seems so damn expensive. This choice is probably among one of the biggest financial decisions that an adult makes. Buying a home is the American dream. Most adults see owning a home as an investment, but sometimes the return on that specific investment is just not worth it. Others prefer renting for the flexibility and minimal responsibility it offers, even though they could possibly amass a much larger net worth over time if they bought a home instead of renting.
While buying a home can be more expensive and complicated than renting, many believe that renting is just paying someone else’s mortgage. This decision can affect your lifestyle and the size of the savings you accumulate over time. With that being said, it can be hard to tell which is a better deal, for anyone.
There are arguments both for buying and for continuing to rent, depending on your individual circumstances. To help you understand these variables and evaluate your own situation, there are some important questions to consider as you make the buy-or-rent decision. Such as, how long are you planning to stay where you are, are you throwing away money on rent, what does your market look like, how much will you save on taxes, etc.
Basically, you have to do your homework. Home ownership can be very rewarding if you are properly prepared and informed.
But how can you possibly know which option is best for you and your specific situation? This question is what we are going to explore today. I am going to cover both the pros and cons of buying and renting.
So let’s dive right in and explore the pros and cons of buying a home.
Pros Of Buying A Home:
Good for long term stability if you are planning on staying in your home for at least five years. No more first, last and security, then move in a year or two and pay that all over again.
Build equity and be eligible for homeowner tax breaks and credits.
Your monthly mortgage payments may be less than rent, or at least equal.
Being a homeowner gives you freedom! No one can tell you what to do with your home or what you can do in it. No more pesky landlords!
Cons Of Buying A Home:
You will be stuck with the same house, so choose wisely.
You will have to pay property taxes annually.
You will have to pay for home repairs and maintenance. Missing that landlord right about now?
You could actually lose money. People often buy too much house, the wrong house, in the wrong neighborhood, or at the wrong price. Once again… do your research!
So if you are interested in buying a home do your due diligence. Home ownership is a good option if you plan on living there for at least five years. Also, home ownership can be more costly up front and requires maintenance, but it can be cheaper in the long run and it is a good mechanism to build up equity. Plus, you are the boss of your own property, so you can do with it what you want.
Now that we have explored the good, the bad, and the ugly sides of becoming a homeowner, let us look at the pros and cons of renting.
Pros Of Renting:
Good for the short term because you have the freedom to move anywhere every year, or sooner.
Gives you the ability to live in an area you can’t afford to own a home in.
Maintenance and repairs are on the landlord.
Good for working on your credit or building savings.
Cons of Renting:
No return on investments. The money you are paying towards your rent just “poof” disappears as soon as you pay it.
You have to follow the lease agreement and the landlords rules.
You cannot change anything without permission.
Opportunity cost. The money you pay your rent with could have gone to paying off a home you own.
For some, renting can be a better option than buying. If you are working on your credit or building up your savings, renting can be a good option. The freedom from being tied down to one place or from the responsibility of maintaining a home can be liberating for some. However, rent is usually more than a mortgage payment monthly, and all the money you spend on rent could have been going towards a home, your business, or anything else you might want to spend a large amount of money on. On the other side of the coin, in some areas fast-rising home prices and higher mortgage rates have made it cheaper to rent a home than buy and own a home. So once again, research your area and mortgage options thoroughly.
Basically, buying a house is a big responsibility that can be very rewarding if you decide that once you have weighed the pros and cons it would be a good investment for your particular situation.
If you are still on the fence, there is a great Rent v. Buy calculator from BankRate.com that could help you decide.
Ultimately, the choice between buying a home and renting comes down to what is best for you, and your personal situation. The final decision is always up to you.