When you are in the midst of home shopping, the first question comes to mind is whether or not to rent or buy a house. While there are benefits of renting your home, buying a house has certain advantages, too. So which option is better when it’s rent vs. buy?
Whether you choose to rent or buy a home, there are certain benefits and detriments to either choice. There are a number of factors to consider before you choose to rent or buy. Take a moment to see the advantages and disadvantages of renting vs. buying a house.
Buying a Home
Buying your first home can be a big step in your life, so you’ll have to carefully consider the pros and cons of buying a house. While there are many benefits of owning a home, there may be some financial risks and additional responsibility that may make it more appealing for renting vs. buying a home.
- Free to customize, decorate, or remodel. When you own a home, you can do with it as you please. You can make additional rooms, paint the walls, and do all sorts of different things to it without needing permission from a landlord. In fact, some customizations and additions made to your home might increase its value in the long term.
- More stable housing costs. If you have a fixed mortgage rate, your principal and interest will remain the same until your mortgage comes to term. It is easier to budget considering there won’t be any raise in payments. The only items that may raise in cost would be taxes and homeowners insurance.
- Eventually, you’ll own it outright. Once your home is fully paid for, it’s yours. You can sell it for a profit, will it to your heirs, or do whatever you want with it. In the meantime, you can enjoy your fully paid off house with only needing to pay taxes and insurance.
- Your house may increase in value. Depending on how the housing market is going, your home might end up being worth more than what you paid for it. This can be used to your advantage if you choose to sell your home later on.
- Tax advantages. During tax season, you can deduct your mortgage interest and your local property taxes on your tax bill. You’ll want to consult with your tax advisor to see if you can use this to your advantage.
- You can build equity. As you gain ownership of your home, you can build up solid equity that can be used to fund your retirement, borrowed for a loan, or used to buy your next house.
- Higher maintenance costs. Leaky sink, shoddy landscaping, broken door frame, all of that becomes your responsibility to repair or replace. If you can’t do those things yourself, you’ll have to pay someone to do them for you. Even basic upkeep to a home costs up to 3% of the home’s value every year.
- Your house may lose value over time. Depending on the economy, your home’s value could go way down depending on a number of outside factors. You may end up paying more than its current worth on your mortgage.
If you choose to buy your home, you’ll want to get homeowners insurance to protect your investment. Homeowners insurance covers property damage done to your home along with protecting some personal items from theft or loss. It can also cover liability in case a visitor gets injured in your home. When buying a house, homeowners insurance is necessary to help pay for any unexpected repairs and damage from hazards.
Renting a Home
When debating renting vs. owning a home, you may decide to just pay rent for the time being. While owning a house has its perks, renting has its own flexibility and freedom in some cases. Here are some of the pros and cons of renting a home.
- Great for short term living. If you are not committed to living in a certain area and want to be able to move with little notice, renting can be a great option depending on your landlord and your lease. This is a good choice for people who are starting out their careers and want the flexibility to move on to something better without feeling rooted within a specific location.
- Free from maintenance responsibilities. If you are busy and on-the-go, you won’t have time to worry about mowing the grass or getting your central air conditioning fixed. If you rent a space, your landlord will be responsible for ensure that basic maintenance and repairs are made to your home to keep it in good shape.
- Usually less expensive. It is typically cheaper to pay rent from month to month than making a down payment on a house and paying a mortgage. Some landlords may even cover the cost of power, water, and other utilities.
- More restrictive. If you wish to paint the walls of your home or do any form of remodeling, you will need permission from your landlord before you do it. There may also be other restrictions while renting such as banning pets, smoking, or having visitors after certain hours. These and many other restrictions could be included in your lease.
- Rent cost can fluctuate. Even though fixed mortgage payments may be higher, they’re fixed at that price. The cost of your rent may increase each year. There may come a point where you may be paying enough in rent that it matches the cost of a mortgage payment, depending on how long you stay in a rented home and the location.
- Little to no tax benefits or equity. When you rent a place, you aren’t investing in it. If you choose to rent a place, you will not be building any equity that can be used for other things. You also won’t be able to write off any rent payments on your taxes either.
Even though it is the landlord’s responsibility to cover the damages done to your rented home’s property, it doesn’t cover your items within your home. Renters insurance can cover the repair or replacement for the personal belongings in your home such as furniture, electronics, and other items lost or damaged in fire or other hazards. It also offers liability protection in case someone gets injured inside your home. There is a lot that renters insurance can cover and it is worth protecting the items you do own in your rental space.
Whether you rent or buy, it’s important to have your home properly protected. Freeway Insurance can provide a wide assortment of homeowners and renters insurance rates to fit your needs. Get a free renters insurance quote or a free homeowners insurance quote online and we can get you an affordable plan to protect your household.