In this blog, we will discuss and cover the pros and cons of buying versus renting a home for homebuyers. Homeowners can enjoy building equity in their homes while living in their investments. A home is most people’s largest investment. As you make your monthly mortgage payment, you are paying down the principal of the mortgage loan balance.
Besides reducing the loan balance, you are also gaining a potential appreciation for the value of your home. As a renter, your rent payments are nothing more than an expense. Your rental payment is helping your landlord gain equity on your rental home. There are many pros and cons of buying versus renting a home.
Buying a home has its advantages and disadvantages and so does renting. The individual’s personality and personal preferences play a big role in the pros and cons of buying versus renting a home. In this blog, we will cover and discuss the pros and cons of buying versus renting a home.
Pride of Being a Homeowner Versus Being a Renter
What Is The Biggest Disadvantage of Renting Compared To Buying a House?
Another frequently asked question is what is the biggest disadvantage of renting compared to buying a house? Paying rent versus a home mortgage is a very predictable expense. Most renters know the fixed rental payments are each month for the one-year period term of the lease. Renting is for people who have a lavish lifestyle.
Being a renter benefit people who do not want to be tied down in an area for an extended term and want to be on the go. Even though renting can be more expensive than owning a home, you can move to a different area year after year without worrying about selling your home. You do not have to worry about maintenance, repairs, or landscaping being a renter as you do as a homeowner.
Why Do People Rent Versus Buy a Home?
Almost half of the population are renters. There are many benefits to renting a home versus buying. Those who do not know the town, county, or state where they are planning in planting their roots may want to hold off on buying a home. Many professionals who travel a lot and/or get transferred to different states may want to hold off on buying. Renting a home does not require a long-term commitment. You can normally rent a home on a short-term lease or even month to month. Most landlords would want a security deposit of two months’ rent which is normally less than a down payment on a house.
What Are The Disadvantages of Owning a Home?
Why You Shouldn’t Own a Home?
Why Is Buying Better Than Renting a Home?
Renters Cannot Benefit From Tax Advantage Of Homeowners
There are no tax advantage benefits to you as a renter. Homeowners can tax advantage of mortgage interest tax deductions, property tax deductions, and depreciation. If you are a long-term renter, the chances are that your monthly rental payments will increase every year you sign a new lease. A homeowner with a 30-year fixed rate mortgage has the same mortgage payment every month for 30 years. It might be more or less if the property taxes and insurance on the home increase or decrease but the mortgage payments will never change for the 30-year duration.
Restrictions of Being a Renter From Landlords
A renter will be restricted on how to decorate their home without the landlords’ permission. A renter might also be restricted to having pets. You as a renter do not have the same type of freedom as a homeowner. You as a renter do not have home security as well. Renters always need permission from their landlords. Cannot paint a room any color they like. Cannot make a garden. If your landlord wants to sell your home or rent it to someone else, he can not renew your lease and ask you to move.
Is Buying a Home a Great Investment?
There are many pros and cons of buying versus renting a home. By purchasing a home, you automatically build up equity as each month goes by when you make your principal mortgage payment. Your home can also appreciate in value. You have total control of your home and decorate it the way you like it and can have any pets you like without asking anyone. You also have home security where nobody can ask you to leave unless you default on your mortgage or property taxes. As a homeowner, you will be given the advantages of many property tax benefits like deductions on mortgage interest and property taxes.
Is It Better To Be a Homeowner Versus a Renter?
Some disadvantages of owning a home versus renting a home are that you do not have the luxury of just picking up your bags and some furniture and relocating. It is a commitment. Once you purchase and close on a home, you are pretty much stuck there for a few years. A home buyer should do extensive due diligence when deciding on buying a home. If you got crazy neighbors, you will be stuck with them.
Cost of Home Maintenace and Repairs For Homeowners
Another disadvantage of owning versus renting a home is that you are now in charge of maintaining your home. No more landlord to call. Whether you do it yourself or decide on hiring someone, you are the Chief Executive Officer of your home maintenance department. Some maintenance items can cost thousands of dollars.
What Should My Home Maintenance Budget Be?
A furnace may cost over a thousand dollars to fix and $5,000 or more to replace. Air conditioning systems can cost several thousand dollars. Homeowners need to purchase lawn equipment such as lawnmowers, trimmers, tools, and other home maintenance tools. Homeowners may need to spend a few hours a week doing maintenance such as mowing the lawn and/or plowing the driveway.
What Is Considered When Qualifying For a Home Loan?
There are many pros and cons of buying a versus renting a home. Potential homebuyers should consult a mortgage broker to see what they qualify for and what their monthly housing expenses will be. Many times, monthly mortgage payments with insurance and taxes can be lower than the renter’s monthly rent payments. Gustan Cho Associates is a mortgage brokerage company licensed in 48 states with no lender overlays on government and conventional loans. We are also experts in non-QM mortgages.
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July 16, 2022 - 7 min read