Choosing to rent or buy your home is a major decision that affects not only your lifestyle but also your financial health.
In the U.S., many people lean toward ownership. This is partly because of the decades-old message that being a homeowner is the key to happiness and part of the American dream. Real estate is also big business for everyone, from mortgage lenders to real estate agents to home improvement stores. It is a part of our cultural mindset and economy. However, it’s important to remember that owning a home isn’t always better than renting, and renting is not always as simple as it seems. Consider the pros and cons of each to figure out whether renting or owning is best for you.
KEY TAKEAWAYS
- Renting offers flexibility, predictable monthly expenses, and someone to handle repairs.
- Homeownership brings intangible benefits. They include a sense of stability, belonging to a community, and pride of ownership, along with the tangible ones of tax deductions and equity.
- Contrary to popular belief, renting doesn’t mean you’re “throwing away money” every month, and owning doesn’t always build wealth “in the long run.”
Renting
Renting means you can move without penalty each time your lease ends. However, it also means you could have to move suddenly if your landlord decides to sell the property or turn your apartment complex into condos. Less dramatically, they could just bump up the rent to more than you can afford.
The biggest myth about renting is that you’re “throwing away money” every month. This is not true. You need a place to live, and that always costs money in one way or another. While it’s true that you aren’t building equity with monthly rent payments, not all of the costs of homeownership will go towards building equity.
When you rent, you know exactly how much you’re going to spend on housing each month. When you own, you might pay nothing more than your mortgage and regular bills in one month. Then, the next month, you might need to spend an additional $12,000 on a new roof (which your homeowners’ insurance might not cover). While you might be temporarily inconvenienced by a leaking roof as a renter, it’s unlikely you’ll ever have to pay to replace your roof when you rent. Your monthly, home-related expenses, such as renter’s insurance, tend to be more predictable and significantly cheaper.