Before discussing the pros and cons of renting versus buying a home, we have to consider which one is more economic at the end of the day. When looking at the bigger picture, there is a plethora of different rent vs. buy calculators out there, but most of them compare annual rents to asking prices to figure out if it’s a good or bad time to buy. If you can buy a home with a really cheap mortgage and lock it in for the next 30 years, you would think that you’d be in pretty good shape. Unfortunately, in reality, nothing is ever that easy. With homeownership comes responsibility, whereas renting may be relatively carefree. Here are the pros and cons to both sides of the argument:
Pros of Renting a Property
- The freedom to move whenever you want (depending on your lease)
- The lack of responsibility and maintenance needed to put into your home
- Fewer expenses that might be paid by the landlord (which won’t be you), such as utilities
- The option and ability to put your money into other investments that may yield better returns and help you achieve other goals
There’s also a huge benefit of psychological freedom when it comes to renting. Instead of being locked in for decades, you have only made a commitment for months.
Cons of Renting a Property
- You walk away with nothing to show after paying tons of money in rent
- Leases of 12 months or longer may lock you in
- You could be forced to move on fairly short notice if the landlord or owner wants to sell
If you wish to establish a household or start a family, renting might not be the best way of going about it. Your options in terms of what you want to do with the palace might be limited. Additionally, your rent can and will most likely rise, even if some level of rent control is in place.
Pros of Buying a Home
- You are in charge and can do whatever you want (remodel the place , move out and rent it out, stay for decades or even forever)
- You can acquire a ton of wealth in the process without lifting a finger
- Might be cheaper than renting and tax deductibles
Your mortgage payment becomes cheaper compared to a rental payment once you factor in the long term tax savings. An owner of property also has fewer restrictions, and can add or modify to their heart’s desire. This means you can make your property worth even more over the years, or simply make it more useful/attractive to you and your family.
Cons of Buying a Home
- Greater responsibility and potential liability
- Might be more expensive than renting (and you might need to come up with a large down payment)
- Harder to pick up and go if you want to move for whatever reason
There are plenty of disadvantages to owning property. First off, you must come up with a sizeable amount of money, either for down payment or to buy outright with cash. With rent, usually you just need the first and last month’s payment.