Deciding on home ownership.

To Buy Or To Rent

So, should you buy or simply rent your next home. This is a decision that many are having to face. It used to be that home ownership was the cornerstone of the American dream. Not so much anymore. Renting, in some ways has just as many advantages as buying. So which choice is right for you? Let’s take a closer look.

It used to be so cut and dry. Buying a home was the goal of every hard working American. It was the only way to get stability and start your American Dream. This is just not the case anymore with so many people choosing to rent and avoiding the commitment of home ownership. Let’s take a look at the pros and cons of both choices to help you decide what your choice should be.

Buying A Home

Home ownership is a part of many peoples lives because it has a number of benefits both emotionally and financially. Here are just a few of the positive benefits to owning a home.

Positives

  • Equity
    For some people this is the only savings account that they will have. For others, it is a big part of their financial planning. Most homes will appreciate and significantly. Depending on the market, your home could increase 10% a year in value. When you eventually sell your home, a good portion is tax free. Currently $250,000 in profit for a single person and $500,000 for a married couple. $500,000 in tax free money can sure come in handy upon retirement.
  • Fixed Living Costs
    If you rent, your rental costs can change over time. Rent never goes down and as property increases in value, so does the rent. Once you sign that mortgage though, your living costs stay relatively stable. Sure, as your home increases in value, your property taxes will go up but this is minor compared to the increases that you would see with rent. You might therefore initially pay more for a mortgage than you would for rent but eventually be paying less than a renter.
  • Stability
    There is something comforting knowing that you will be able to stay in one place for as long as you want. You can not get that with renting because your landlord can decide to not renew you at any point. Stability is particularly important when starting a family. Kids thrive in an environment that is not changing all of the time. They can feel secure and safe in their home and not have to change schools.
  • Independence
    It is your home and you can do with it as you wish. Want to paint, remodel, plant a tree, you do not have to  ask permission to do so. When you rent, everything must go through the landlord.
  • Pride of Ownership
    When you own a home, you are proud of it. It is one of those things that tells people you made it and are a responsible adult. You are proud to say you own a home. Most people are not so proud to say they are a renter.

Of course, there is always a flip side to everything. There are definitely some negatives to owning a home. Here are some for you to consider.

Negatives

  • Responsibility
    You are responsible for everything and you no longer have someone to call who can handle it. If the roof leaks, it is on you. If a pipe bursts, you must fix it. This means more work and potentially more money out of your pocket.
  • Loans
    Want to learn what paperwork is? Apply for a loan to get a home. Mortgages are complicated and frustrating. It will seem like the loan processor is never going to stop asking for more documents.
  • No Flexibility
    When you used to rent, you could pick up and go whenever you wanted. As soon as the lease was up, you could move to any city that you wanted. If you wanted more space, you could upgrade. If you wanted more amenities, you could find them. When you buy a house, you are stuck with what you got unless you want to go through the long process of selling.
  • You Could Lose Money
    Most houses will gain value but it is always possible that the market could turn. You take the chance of ending up in a home that is worth less than you owe. It is a small risk, but it is still a risk.

Renting A Home

Buying a home is not for everyone. Some people do not like being tied down and do not want the responsibility. If you think that you might be one of those people, let’s look at the positives and negatives of renting.

Positives

  • Freedom
    You can pick up and move whenever you want. As soon as a lease is up, you can move to a new home or even a new city. Selling a house takes months and is quite an undertaking.
  • No Responsibility
    If something breaks on your rental, you just have to pick up the phone and call the landlord. They have to take on the responsibility of getting it fixed. This means the effort and the expense is on them. Home repairs are costly. It can cost 500 dollars alone to replace a simple water heater.
  • Cheaper
    Initially at least, your rent payment will be cheaper than what people are paying for a mortgage. Your rent will gradually go up every year, but so will your salary.
  • No Risk
    Owning a home could potentially be risky. What if you buy one with hidden problems? What f your home actually loses value? These risks can be minimized but not completely eliminated.
  • You Stay Liquid
    If you rent, you can keep your assets liquid instead of investing them in a home. Sure, the home might gain in value but the equity is note easy to pull out.

Now, take a second to look at the negatives of renting a home. See if they outweigh the positives.

Negatives

  • No Equity
    You are throwing your rent money away every day and the only one you are making richer is your landlord. Rent for 10 years and you could be throwing well over $100,000 away in lost equity.
  • No Stability
    You lose the ability to control where you live when you rent. At any point, your landlord could decide to sell the home or just not renew your lease. If you have kids, this means that you would have to uproot them from their friends and possibly their school.
  • No Freedom
    You have to ask permission to do any modifications on your home. This includes basic things like painting or even planting a tree. Want a dog? You will have to ask your landlord first.

It’s Your Decision

The choice of whether to buy or rent is up to you. Basically it comes down to what you value more. Stability or freedom. Making a profit or taking on less risk. Everyone is different and home ownership does not necessarily need to be a part of your American Dream.

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