The question of whether to rent or buy a home has long been a topic of much debate. There are many pros and cons on both sides of the argument and the best decisions are made based on the needs and circumstances of each individual. There is no definitive answer to the question because everyone's situation is different, and while it might be an easy decision to purchase for one person, renting would make much more sense to another. In order to make the best choice, it is vital that the individual make an informed decision by exploring all the pros and cons of each scenario.
To many people, buying a home is the definition of the American Dream. Besides being an excellent investment, purchasing a home has many benefits not realized when renting. Home values generally appreciate, and since the housing market down turn, out-of-control property valuations have ceased and home values have somewhat stabilized. The benefit of this is that home values should maintain stability or at least not fluctuate wildly and will eventually appreciate, which creates equity for the homeowner.
As the mortgage is paid down over the years, the equity in the home grows and the net worth of the homeowner increases, especially if property values increase over that time. This process acts as a form of a long-term savings account that can be utilized in the future if necessary. There is also the tax benefit of deducting mortgage interest payments that makes purchasing a home a smart investment.
There are other benefits to owning a home that go beyond the financial incentives that are enjoyed through homeownership. There is a definite sense of security that comes from owning a home that cannot be found in renting. As long as the mortgage is paid every month, the homeowner has the knowledge that no one can evict him, raise the rent, or put the home up for sale.
People who own homes tend to feel more a part of the community in which they live, and this sense of community is very attractive to families and those planning on starting a family. There is also a sense of freedom that comes with homeownership because the owners can make changes to the home as they see fit and they don’t need approval from a landlord to do it. Upgrades and home improvements also add to the value of the home as well as enhancing its appeal.
Although there are many benefits to owning a home, there are drawbacks that the potential home buyer must be aware of and consider prior to deciding to purchase. Buying a home is expensive, and in addition to the large down payment of cash that is necessary to get financing for a mortgage, there are other costs that need to be taken into account. There will be closing costs for acquiring the loan that are passed on to the buyer as well as mortgage insurance. Additional expenses include:
Some properties must be renovated prior to moving in and this can be particularly expensive, especially when it requires securing a short term rental while work is being completed. There is also the cost of maintaining the home that must be considered. Appliances that break, roofs that leak, and plumbing that drips can be very expensive for those who are not able to perform their own repairs, and hiring contractors can be costly and sometimes confusing as well.
There are other drawbacks to purchasing a home other than the financial costs. It is very difficult to know what a neighborhood is like without living in it for a time, and sometimes, people find out too late that their neighbors or the homeowners association can be a bigger problem than what it costs to get into the home. Bad neighbors are perhaps one of the biggest nightmares for a new home owner. There is also the fact that buying a home ties up a great deal of cash and obligates your finances. These are all things that must be weighed and considered so that the potential home buyer can become informed and make the best possible decision.
While purchasing a home remains the ultimate investment most people can make, not everyone can afford to purchase a home or even qualify for a mortgage. For those who fit into this category, leasing a home is not only a viable option, it may be the only option. There are many benefits to renting a home, not the least of which is the dramatically lower initial cost.
People who rent or maintain a lease agreement usually only have to come up with first and last month’s rent and possibly a security deposit. This is much easier to accomplish than putting together a twenty percent down payment on a several hundred thousand dollar home.
It is also much easier for people with a poor credit history to qualify for a rental, and many times, even with bad credit, people can get into a rental by putting down a larger security deposit. Renters also have the advantage of not having to pay for the cost of repairs to appliances or the home itself. One of the most attractive aspects of a lease is that maintenance and repairs, which are the biggest worry of owning a home, are taken care of by the landlord, which further enhances the financial appeal of renting.
There are other benefits to renting other than the financial incentives. It is generally much quicker and easier to find and apply for a rental than purchase a home. The paperwork is much easier and the entire process can be completed in a number of days. Renting also has the advantage of allowing people to try out a neighborhood to see if they like it prior to buying a home there. Renting also gives people the freedom to move if they don’t like the home or the neighbors next door.
There are drawbacks to renting that must be considered. The very nature of renting a home is that it is advantageous for those who don’t want to stay in one place too long. This makes it difficult to achieve a sense of community unless the individual rents continually in the same neighborhood. While renting can make financial sense in the short term, renting the same place for a prolonged period of time can be a waste of money that could have been better applied toward a down payment on the purchase of a home. There is also the loss of freedom that comes with renting because renters cannot make changes to their home without landlord consent. Additionally, not all rentals allow pets, which can be problematic for pet lovers who can’t move into the house they want and keep their pet as well.
Both renting and purchasing a home have advantages and disadvantages that each individual must weigh for their unique situation. For many, there really is no other option than renting, but for those who have the credit and the ability to purchase, it might not always be in their best interest to do so. It really boils down to having as much information as possible and using good judgment in order to choose the right option for your situation. Many people purchase a home just because they can, and many people rent just because they think they can’t purchase a home, or they’re afraid to try. By using informed decision making, people can ensure that they are making choices that won’t come back to haunt them later.
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