Home Buying Versus Renting

Should you rent or should you buy? It is not easy to decide to go from renting to buying a home, but it is a decision that most face at some point. There are advantages and disadvantages to each decision, and before you make your own decision, be sure to take into account all of them.

Buying and renting each make sense under a variety of circumstances, although in most cases it makes more financial sense to purchase a property. However, there are a few exceptions when renting instead of buying makes more sense.

The first of these is when you have credit challenges. For example, if you have a low FICO score, you may not be able to obtain a low interest rate on your mortgage loan. While you still may be approved to purchase a home, your monthly payment might be higher than renting and if you took some time to focus on improving it prior to buying a home, you could be in a stronger financial position. So, in this instance, it makes more sense to rent and improve your credit prior to purchasing a property.

There are some upsides to renting; for example, you don’t have to worry about property maintenance as this responsibility lies with the landlord. Also, renting offers ease in relocation as you don’t have to wait for a property to sell, only the expiration of your current lease.

But, one of the most significant downsides to renting is that you will not be building any equity in your current property. Your monthly payment will be going towards building equity for someone else.

When buying a home, it is important to take into consideration any and all associated costs. The costs of buying a home are not as simple as just your mortgage payment. You will also need to take into consideration home owner’s insurance, flood insurance, property insurance and maintenance costs. When you own your own home you cannot telephone “a landlord” and ask him to fix the air conditioner. Maintenance is your sole responsibility, and you will either have to fix it yourself, (if qualified to do so) or pay a tradesman to do it. Whichever you choose, you have to take these extra expenses into account.

But, despite the challenges of home ownership, you are still building equity that you may be able to access if you move in the future. Or, when you complete your final mortgage payment, you will own a piece of real estate.

So, there are advantages and disadvantages of both home ownership and renting. Take into account each factor when determining which option is more suitable for your lifestyle and your financial needs.