Which Housing Option is Best for My Family?
If you’re unsure about whether to rent or buy a home today, it helps to consider the pros and cons of both housing options, to see how they match with your current situation.
Buying a home may seem preferable because of the financial security it tends to offer, particularly at tax time. However, the costs associated with home ownership may make this option less than ideal right now.
It’s wise to carefully consider all aspects of buying or renting before you make a decision, because the pros and cons may change over time as well.
Keep these considerations in mind when deciding whether to buy or rent your next home:
1. Owning a home is an investment, but not always a good one
In general, you should avoid buying houses as an investment vehicle for quick profit. Some real estate investors do make money this way, but many others lose their shirts, especially in a recession or down economy.
It’s better to buy a home as a long-term investment, one that you’re planning on staying with for a while.
2. Owning a home requires a sizable down payment
A lump sum down payment is required for most people looking to secure a mortgage loan from a lender. If it’s difficult to save this much money, you may want to create an emergency fund or invest the money, instead of buying a home right now.
3. Mortgages include interest payments
Yes, mortgage interest is deductible in some situations; but it’s not always the case. If your interest payments and other deductions are less than your tax return’s standard deduction, paying mortgage interest has little tax benefit.
4. Homeowners must make their own repairs
As a homeowner, you have two options for repairs; either do it yourself or hire a professional serviceman. You don’t have a landlord to rely on for fixing things when you own your own home. If you’re not prepared, financially or otherwise, for day-to-day upkeep and maintenance costs, put off buying a house until you’re ready.
5. Owning a home requires additional insurance
Carrying homeowner’s insurance while you’re making payments on your mortgage is not an option, it’s an obligation. Even when your mortgage has been paid, keeping this valuable insurance helps protect your most important asset.
- Keep in mind that homeowner’s insurance is more expensive than renter’s insurance.
6. When you rent, you don’t earn equity
Paying monthly rent doesn’t help you own anything in the long run, even though the owner of the property is building equity from your monthly payments.
There is no investment value here, unless you’re saving money for other investment vehicles like IRAs or mutual funds by renting.
7. Owning a home has its benefits
When you own your own home, you and your family inherit a sense of security, community, and pride in what you’re investing in. You can make any changes to the home or property without worrying about lease agreements, covenants, landlords, or someone terminating your lease.
8. Renters save money
When you’re renting a place to live, you don’t pay any property taxes, insurance fees, homeowner’s association fees, or maintenance charges. These are the significant savings that make renting an attractive option for some. Compared to buying a home, you can save or invest more money in things like investments, emergency funds, and savings accounts.
As you can see, both renting and buying a place to live have benefits and drawbacks.
Take the time to weigh all your options and obligations before making an educated decision. The best housing option is one that suits the needs of your family and your financial situation.