If you’re currently renting a home, you may be giving thought to buying a home. But you’re perhaps questioning what are the benefits of owning a home versus renting one? Let’s take a look at the pros and cons of each.
Homeownership
Pros:
- Builds equity, especially here in Idaho, where home prices are appreciating rapidly.
- Tax write-off benefits – you’re able to write off mortgage interest.
- Unlimited freedom to customize the living space to your liking.
- Mortgage payment is usually fixed, not subject to increasing (unless you have an adjustable-rate mortgage).
- Provides security for you and your family.
- The ultimate way to invest in yourself.
- The American Dream
Cons:
- The homeowner is responsible for all repairs and maintenance.
- The homeowner is responsible for paying property taxes.
- The homeowner is responsible for paying for any HOA dues and is responsible for adhering to the CC&RS (the rules) set forth by the HOA.
- Closing costs are higher.
- Not feasible to move before living in the home for at least two years.
- Equity is subject to market fluctuations and is out of the homeowner’s control.
- From an investment standpoint, it’s not a liquid asset and takes longer to sell compared to stocks/bonds.
Renting a Home
Pros:
- Renter is not responsible for repairs or maintenance on the property
- The renter is not tied to the home and can readily move
- Allows you to test drive living in different types of houses.
Cons:
- Usually requires a long-term lease.
- Rent prices may be higher than actual mortgage payment.
- Rent can go up over time or change rapidly with little advance notice.
- No tax write-off benefits
- You’re not building your own equity
- Landlord may decide to sell the home and you may be forced to move on short notice.
- You can’t make any upgrades or changes without permission of the landlord.
- May require a security deposit.
Some questions to ask yourself if you’re considering buying:
How long do you plan to live in the same place? If you’re thinking about staying put for longer than five years, buying a house may make better sense.
Does it make financial sense to own? Do you have the resources for a down payment and closing costs when buying a house?
Photo Credit: iStock.com/triloks