Deciding between renting and buying has a massive effect on your future goals, lifestyle, and financial stability. So, while deciding, you need to consider all of the below factors. Both options require a stable income to give you a place to call your home.
While renting offers flexibility, fixed monthly payments, and no repairs expenses, homeownership provides a sense of security. But each comes with a set of cons, as well as pros.
So, which is better, renting or buying? The answer isn’t that simple. Buying a home isn’t always great, and renting isn’t always stress-free.
Let’s dig deeper into the downsides and benefits of renting vs buying to choose the best option according to your financial health and personal preferences.
Here are some of the significant differences between renting and buying:
People often prefer buying a home as they consider it a way of securing their future. Most people feel pride in owning a home instead of paying rent. Of course, homeownership is a good investment, but many factors may impact the value of your property.
These include:
As a homeowner, these factors can adversely affect your property value. However, as a renter, they would benefit you as your landlord might be pushed to lower the rental costs. No landlord wants to go without rent, even if it’s a little less than expected.
On the bright side, homeowners can benefit from some tax advantages. As a homeowner, you can reduce your out-of-pocket expenses due to the home mortgage interest deduction.
This benefit is available in the early period of the loan, as long as the deductions are itemised.
Sometimes, your due mortgage can be cheaper than rent. However, if interest rates go up, you may end up paying more on your home mortgage repayments.
Other expenses you may have to pay as a homeowner that don’t apply to renters are:
If you rent a home, you don’t have to pay most of the expenses listed above. Since you don’t own the property, these taxes/expenses won’t be subject to you if not mentioned in the contract.
In addition, you can’t take advantage of the mortgage deduction.
If you own the’ property, you’ll have to take care of it too, and that means keeping a check on its maintenance every now and then. Homeowners are responsible for making repairs and maintenance in their homes to keep them presentable, safe, and valuable.
These expenses can be very costly, and most of the time, these renovations don’t boost your home’s market value.
But despite that, it’s still your home, so you can decorate it as you want without worrying about anyone.
On the other hand, if you’re renting, you usually can’t make many changes in the home you’re living in.
Since the rented house isn’t actually yours, your landlord is obliged to make all the repairs. However, you’ll have to wait for your landlord to make changes which could be a considerable amount of time. Yet, the wait is worth the high costs you may have to pay as a homeowner.
If you’re a busy bee, life and work might be pretty tricky for you to balance. In such cases, you probably won’t have the time to take care of your damaged pipes, mow the lawn, repair the mailbox, or repaint the rooms.
Moreover, if you sell your own home, the entire process may take months. So, you can’t move out quickly. On top of that, owning a home can increase your stress levels since it often requires investing large amounts of money.
Meanwhile, renting comes with less financial stress and time constraints. If you face any damage, you can simply contact your landlord and see the repairs being made while relaxing on your couch.
In addition, you can move out of a rented house much more easily than selling or buying one. Renting has lower financial risk, and you can save your money into a retirement account for a secure future.
The decision of renting vs buying comes down to your own preference.
If you’re working with a lower budget and want to move to your desired location soon, renting is the way to go.Even if you’ve saved a reasonable amount for buying you can put that money aside for your post-retirement period or make investments elsewhere.
This way, you’re also transferring the repair responsibilities to your landlord.
So, if you’ve made your mind for renting, you can gain the following advantages:
Generally, renting a house is cheaper than buying one. That’s because the total costs incurred in buying are considerably higher than renting. However, you may have to pay less in mortgage payments than on rents.
It was found that the asking rents in the UK increased by 6.2% in June 2021 compared to June 2020. Around the same period in 2021, the average monthly rent in the UK, except central London, reached £1,000 for the first time.
Luckily, the interest rates are at record lows, which means homeowners may have to pay less in their monthly mortgage payments.
A major downside in buying a house in the UK these days is the increased first-time buyer deposit. Halifax reports that the average deposit needed to buy a house in the UK (excluding London) reached £58,986 in April 2021, with London’s at a whopping £111,321.
That means that even if you manage to save £1,000 per month, it would take you more than nine years to have enough money to buy a house in London.
While the final decision depends on your financial health, it also revolves around your comfort and future planning.
Both types of housing options have their own pros and cons. Where renting holds fewer financial risks, owning a home makes us feel secure.
So, evaluate the risks involved, especially if you plan to buy. If the housing prices increase, you can make more gains on your mortgage. However, if the prices fall down, you’re at a greater risk.
This is why renting always makes sense, regardless of your financial situation.
By renting a home, you can get rid of additional expenses, chores, maintenance, and financial risks. Plus, you can in neighbourhoods that you would otherwise not be able to afford.
So, if you want to move out quickly, don’t waste more time; renting is the way to go!
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