Is rent or buying a home right for you?Written by Carly Simon-Gersuk
It is the age-old question: Is it better to rent or buy a home? There are many pros and cons to each option but deciphering which is right for you may not be so clear-cut. A Pew Research Center report shows that there is a higher percentage of US households renting than at any point since 1965 (1). With the lingering effects of the housing crisis, the decline in homeownership remains low among young adults, various races, and low-socioeconomic individuals.
This ongoing fall in homeownership reflects fewer renter households transitioning to homeownership, rather than homeowners being forced out from financial difficulties. Another Pew Research Center survey in 2016 found that about a third of today’s renters proclaimed they rent as a matter of choice (2). The most prominent reasons for renting rather than owning include but are not limited to: financial obstacles, such as the inability to afford a down payment; not being able to afford in the neighborhood they seek; and the wish to pay down more debt before taking on a mortgage.
Many of us want to own a home one day but while it may not be financially an option at the time there are still plenty of things to consider from both renting or buying. Let’s break down some of the pros and cons.
Upfront, renting means less paperwork and fewer costs, such as maintenance and upkeep since it is the landlord’s responsibility. Your monthly payments may also help build your credit if your landlord reports rent payments to the credit bureaus. This pro is great to help you maintain a higher credit score for when/if you apply for a mortgage loan later on to buy a house. Renting also gives you more freedom to be mobile - maybe you want to move to a new neighborhood or state.
On the downside of mobility, it may mean you have to move more if leases end or are not renewed, renters increase the price to something you will not/cannot pay, or if the landlord sells the property. Another con to renting is that the area you may be looking to live in may not have any open properties. Lastly, you are not likely to get any tax benefits.
Homeownership offers many advantages such as making home improvements without anyone else’s approval, interest on mortgage payments may be tax deductible, mortgage payments can be made to fit your budget, and the ability to build equity in the house overtime. Being able to make the remodels you want can lead to an increase in equity and property value.
Buying a home is costly and requires a substantial investment and paperwork to be completed upfront. As an investment, a home may either increase or decrease in value when you may sell it. Remodels and improvements may cost you a pretty penny, so consider what will actually increase property value and if the location may alter property value.
Written by Carly Simon-Gersuk