To Rent or Buy, the Pros and Cons

Buying a home is one of the biggest decisions you will ever make in your life. Most home buyers are met with the dilemma of whether to buy or rent a home. You do not want to look back and regret buying or renting a home 5 years down the line. Hence, you need to consider a lot before making a decision. Most importantly, look at your current financial situation to help you make the right choice.

Here are a few Pros and Cons of buying or renting a home

Pros of renting a home

  1. Affordable

Renting a home generally costs less money. The initial investment to rent is much cheaper than buying a home. You can use the extra funds you would have used as a down payment for mortgage payment to invest into another saving account that gives higher returns. As for insurance, a renter only needs to insure the content of the rental property and not the structure itself, thereby lowering the insurance costs.

  1. Limited responsibility

When renting a home, you are not responsible for repairs. The property owner is responsible for these expenses. You also get to enjoy a lesser tax impact on your financial situation.

  1. Makes budgeting easier

Rent is a fixed amount. Most times, it also includes utilities. Therefore, it becomes easier for the renter to set a budget.

Cons of renting a home

Despite the many advantages of renting, it has its share of downsides.

  • The Local law does not cover leasing and tenancy agreements. Hence, a tenant should understand what the lease can and cannot do before signing.
  • The tenant should find a way to protect their security deposit.
  • The renter should know about the renter’s insurance policy that protects them from damage and losses.

Advantages of buying

  1. Capital Gain – On buying a home, you assume full ownership and control of the property.
  1. Tax advantages – The buyer may benefit from property taxes and interests that are itemized for tax deductions.
  1. Freedom and fewer restrictions – The buyer has the freedom to restructure, redecorate, and make other improvements where they deem fit. Also, the buyer enjoys fewer rules that they must abide by.
  1. Credit rating – A homebuyer who makes on-time mortgage payments can achieve better credit ratings.

Cons of buying a home

  • Extra expenses- Other than the mortgage payments, the buyer should also cater to insurance, taxes, maintenance, and repairs.
  • Less flexibility to move – Buying a home will limit your flexibility to choose a new job in a new town.
  • Less liquidity on your investment – It can take time to sell a property, thus turning your investment into cash is not as flexible as other investments.
  • Fluctuation of property value – The property value majorly depends on when you bought it. If you purchased it during a boom or bust period, the value of the home might not appreciate as you anticipated leaving you with zero profit when you plan to sell it.

Ultimately, buying or renting a home is a personal choice. However, it is majorly dependent on where you are at financially. You do not want to risk living hand to mouth after buying a home when you can rent one, live comfortably and save up a little more.

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