Owning or buying : which is best for you?
One of the major decisions in our life is whether to rent or buy the place where we live. It affectsour lifestyle, the amount of money we will have at the end of the month, and how big our accumulated savings will be over the years.
The PROs and CONs of buying your own home
It is important for people to have a place to put down their roots, that’s why they buy a house. Owning a home is an investment that can grow and it can also be a source of tax deductions.
Although homeownership is touted as a way to build wealth, don’t forget that the home can lose value. There are a lot of circumstances that could cause a significant population decline and a surplus of housing. The house you bought for$100,000 today might still worth the same after30 years, which means you’ve lost money after inflation.
Homeownership brings intangible benefits, butis not for the restless or nomadic types of people. Real estate is the original illiquid asset, which means you might not be able to sell it when you want if the housing market is downand if the market is up, there are still significant transaction costs when you are going to sell it.
Even if the monthly mortgage payment is similar to, or lower than the monthly rent, the overall cost of homeownership is still higher than the overall cost of renting.
Property taxes, repairs and maintenance, and insurances such as the homeowners insurance, flood insurance and earthquake insurance are only some of the expenses of a homeowner that a renter doesn’t have to pay. Adding up all these costs, you might find that you’re better off financially by renting and investing the money you would have put into a home into a retirement account.
The pros and cons of renting a house
On the other hand, flexibility, predictable monthly expenses, and someone to handle repairs are some of the benefits of renting. It means you can move without penalty each time your lease ends. However, if your landlord decides to sell the property; it also means you have to move suddenly, and worse, they could just bump up the rent to more than you can afford.
If you rent, the landlord will take care of all the repairs and maintenance, though of course thosemay not be done as quickly or as well as you would like if you are the homeowner.
A renter might face unpredictable rent increases each time the lease is up for renewal unless the unit is rent-controlled and rent increases can be steep if you’re living in a desirable part of town.
Which option is best for you isn’t just about money, but also comfort and your vision for your life. Owning doesn’t always makes more sense and renting is not always a way to saveand prospective homeowners need to weigh the risks involved as getting a mortgage often requires using a large amount of financial leverage.
Many people choose owning over renting as it provides a more permanent place to raise children, and frequently, it is the only way to create the residence they want. Indeed, the decision to rent or to own is not just financialbut also emotional.
Owning a home isn’t always better than renting, and vice-versa. Consider the pros and cons of each to figure out which is best for you.