Renting Vs Buying: Which is Right for You?
We are told from an early age that buying a home is a great achievement and embodies the ideal of the American dream. However, when it comes to renting or buying a home, which is better differs from person to person. For many people, owning a home makes more sense financially and from a lifestyle perspective than renting a home. The short answer is: if you can afford the down payment on a home that is likely to go up in appreciation, and you plan on staying in that home for at least five years, you should buy it. Let’s take a look at the benefits of owning a home vs renting.
Owning a Home
A Promising Long Term Investment
Owning a home is an investment many people can understand better than buying stocks because they get the tangible daily lifestyle benefit of living in the home. But the financial benefits are also significant and can be even more substantial than stock investing. As a home appreciates, it accrues faster than a stock might because you get the appreciation on the entire home’s value. Even if the value of the structure itself depreciates, the land on which it sits can become more valuable. You are investing in an asset for yourself rather than a property management company.
There are many tax benefits to owning a home-like residential energy credit, home office deductions (Thanks to the changing time of telework), and more. Homeowners are allowed to deduct mortgage interest and property taxes when they file tax returns each year. Interest on home equity loans, property taxes, and some closing costs when buying a home can also qualify as deductible.
Mortgage Costs Stay the Same as Rents Rise
If you get a fixed-rate mortgage on a home purchase, your mortgage payment can never change. Unless a renter is in a rent-controlled building or neighborhood, their rent is at risk of rising every year. Since the mortgage payment is the bulk of the owner’s housing payment, this creates a lot of budget stability. As for the other costs, both owners and renters have insurance (though insurance isn’t required for renters like it is for owners), and that fee can change very slightly year over year. And while owners have property taxes that renters don’t, and property taxes can rise as the home appreciates, this fee is tax-deductible.
Savings & Stability
When a homeowner is making a mortgage payment, a portion of that payment is paying the loan down each month, giving the owner more equity in their home. This loan pay-down each month is required as part of the mortgage payment, but it’s the owner being required to invest in their own home, so it’s like forced savings that benefit the owner — whereas the entire portion of a renter’s monthly payment is going to a landlord. And generally, people are more likely to stay longer in a home they buy, if only because buying, selling, and moving frequently is difficult and stressful. Buying a home requires confidence you plan to stay there for at least a few years.
Freedom & Privacy
Owning your home means you can paint your kid’s room any color you want, you can change your floors from carpet to wood, and you can put a new chandelier in the dining room without asking a landlord for permission. Oftentimes, making home improvements will increase the value of your property. So you can renovate to your liking without the hassle of worrying about property management.
Renting a Home
Repairs & Upkeep
If home improvement isn’t your forte or within your budget, renting can seem more appealing. The property owner is responsible for that leaky faucet and anything else that breaks or goes through general wear and tear. So, you don’t have to factor those unplanned expenses into your budget.
If you relocate more often than usual, owning a home can make moving very difficult. A house can take much longer to sell than you’d like, and if you move before it sells, you still have to make the monthly mortgage payments, so you’re paying for two residences while living in only one. Your rental obligation can’t exceed the length of the lease, so you have stability in knowing when your next move will be, especially if you have a flexible leasing agreement.
Low Upfront Costs
Except for a security deposit – often the cost of a month or two’s rent – and the occasional pet fees, you don’t have to write a large check or finance the costs required to get a mortgage. And no HOA fees: Buying a home in developments with homeowner’s associations may require monthly dues on top of all the other expenses, and they aren’t optional. When renting, HOA fees, if any, will be included in your monthly rental fee so you can factor it into your budget easily.
Deciding to buy a home versus renting can seem intimidating. We have a long & proud history of helping buyers and sellers along the Emerald Coast. Let Coldwell Banker Carroll Realty, Inc in Panama City, Panama City Beach, and 30A help you make the best decision for your lifestyle! Contact us at http://www.coldwellbankerpcfl.com/ or call one of our locations to meet with a local real estate agent in your area.