Renting vs Buying a Home: Pros, Cons, and Costs

## Whether You Own or Rent, You Call It Home At the end of a long day, there’s nothing better than walking through the door of your home, kicking off your shoes, and relaxing. Whether you rent or own your home, the feelings you get when you’re settled in your favorite spot is hopefully the same: gratitude and peace. Creating a home that inspires you and provides a feeling of security for yourself and your loved ones is exciting and fulfilling. For many years, experts and people alike have openly discussed and debated the pros and cons of renting vs buying a home. Many experts insist that buying a home is the only way to go and that renting is not a great financial choice. The truth, as is usually true, likely falls somewhere in between the two options. There is no doubt that the real estate market is pretty crazy at the moment. Interest rates are fluctuating, prices are skyrocketing in some areas, and even rental rates are changing constantly. It’s hard to know what to do. If you’re considering a move in the near future, you may be debating whether renting or buying your next home is the best choice for you. The answer? It depends on several factors. There are various costs associated with renting and buying a home both before and after the ink is dried on the respective contract. Figuring out [which option](https://realestate.usnews.com/real-estate/articles/renting-vs-buying-a-home-which-is-smarter)<a href="#one">^[1]</a> is best for you can be assessed by taking a moment to consider the costs of each option, your financial health, and your motivations. ## Renting Might Be the Right Move The dream of home ownership has long been associated with obtaining the “American Dream” However, the world is changing. Many people, particularly the younger generations[ like millennials](https://www.businessinsider.com/millennials-renting-homes-instead-of-buying-2019-7 )<a href="#two">^[2]</a>, are choosing to rent indefinitely regardless of their financial ability to purchase a home. After all, the word home does not necessarily mean to own a property. Home is a feeling and renting your home is an option that people are choosing more and more often. As you mull over your options, consider the perks, the downside, and the costs associated with renting vs buying a home. ### Two Perks of Renting a Home ⦁ Mobility: Renting a home means you can move more easily. Whereas, when buying a home, if you want the most out of your investment, you need to stay put for more than a few years. A lease, on the other hand, is shorter term which means you can make changes to your location if you decide you don’t like the area you’re in. Realize you’d rather be closer to your family or a favorite hangout? Don’t like the schools your kids attend? If you’re a renter, moving to your desired location is less complicated. ⦁ Maintenance isn’t your problem: If you’ve never faced a major maintenance issue, consider yourself lucky. A broken pipe, a leaky roof, or an inefficient air conditioner in sweltering heat can put a serious damper on your happiness. If you’re a renter, a call or email to your landlord is typically all that is required from your end to get the issue resolved. A little bit of patience might also be beneficial, but there won’t be any financial strain. If you own a home? The bills are going to have your name on them, and the sticker shock can be intense. ### Downside of Renting a Home ⦁ Less Control of Your Situation: When you’re renting, you may be disappointed by the response you receive from your landlord when issues arise. Repairs and maintenance could end up taking a long time causing inconvenience. You might want to modify your space beyond what is allowed which can be frustrating as you work to create a home that reflects your unique personality. ⦁ Rising Rental Rates: When you rent a home, the rental rate typically does not stay the same unless you’re in a rent-controlled situation or you’re renting from someone willing to make a long-term rental contract. Rules regarding rental rate increases vary by state, but even if your current rental keeps the same rate, moving will mean a potentially higher rent payment. Rental rates are [on the rise](https://www.washingtonpost.com/business/interactive/2022/rent-inflation-housing/)<a href="#six">^[6]</a>and unfortunately many people are being priced out of their cities due to a lack of affordable housing. ### Additional Costs to Consider: When budgeting for a rental home, you’ll want to [consider these costs](https://www.speedycash.com/resources/508/saving-money-tips/a-guide-on-how-to-rent-a-house-or-apartment/)<a href="#three">^[3]</a> in addition to your rental rate. ⦁ Application fees ⦁ Deposit ⦁ Pet Deposit if applicable ⦁ Trash and recycling collection in some areas ⦁ First and/or last month’s rent- dependent on lease requirements ⦁ Renters’ Insurance ## Buying a Home Just Might Be a Better Fit Buying a home has been consistently celebrated as one of the big markers of adulthood. As times have changed, that’s no longer necessarily the case. However, the purchase of a home is a big deal and it’s something many people work very hard to accomplish. Buying a home is a milestone without a doubt, and the security that home ownership provides for many people is understandable. ### Perks of Home Ownership ⦁ Your home is a financial and emotional investment: One of the most common investments made is home ownership. You may want to consider selling your home in the future and cashing out on the investment during retirement. Renting a home does not provide this potential financial gain. There’s also the benefit of having a place to call your own that you’re able to pass down to your children. A home filled with memories and love can be passed down through the generations. ⦁ You can make the home your own: When you own your home, you have freedom to create a space tailored to your every need. Want to knock down a wall and expand part of your space? Go for it. Interested in buying a dog and need to modify your fence? Knock yourself out. ### Downside to Home Ownership ⦁ Maintenance and Home Repairs: The cost of repairing a big-ticket item, as we discussed earlier, can be shocking. There are also everyday repairs and maintenance costs associated with home ownership to consider as well. Lawn care, higher water bills if you plan to keep your grass healthy, filters for your AC unit, fence repairs if you have an animal, and the list truly goes on and on. If you find yourself in a pinch with home repairs that are beyond your budget, [Avio Credit](https://secure.aviocredit.com/LoanApplication/Account) is always standing by to lend a helping hand. ⦁ Spikes in property taxes: Your mortgage payment will typically include money for your property taxes. This money will be held in escrow until taxes are due at the beginning of the calendar year. Once your home is paid off, you’ll pay your tax payment directly vs through your lender. Taxes can (and very often do) increase due to home and land appreciation. That means your monthly payments will increase with time as your tax rate increases. ### Costs to Consider: In addition to your monthly mortgage payment, [consider these costs](https://money.usnews.com/loans/mortgages/articles/why-owning-a-home-is-more-expensive-than-you-think)<a href="#five">^[5]</a> when calculating your ability to purchase a home vs renting a home. ⦁ A home inspection prior to purchase ⦁ HOA or Condo fees ⦁ Taxes can fluctuate ⦁ Mandatory home repairs ⦁ Routine maintenance costs ⦁ Homeowners’ insurance ⦁ Down payments- often around 20% of the purchase price (amount varies per situation- contact a local lender for details) ⦁ Closing costs which are variable and area specific. Contact a local Realtor or Lender for more information. ## Check Your Financial Health Before Finalizing Your Plans Having a solid grasp of the financial responsibility that comes with home ownership may drive many people to continue renting despite being financially capable of owning a home. However, if the financial responsibility associated with home ownership is a fit, buying might be a better option for some people and their lifestyle. To determine what the best option for you is, start with a checkup on your financial health. Consider creating a budget and looking at your current bills. Figure out your target rental payment or mortgage payment. Don’t forget to account for all of the fees associated with renting vs buying a home, and if you need help reach out to a local Realtor or Leasing Agent to help you navigate the process. After you determine which option is best for you, [create SMART Goals](https://www.aviocredit.com/resources/187/Personal-Loan-Facts/how-to-use-smart-goals-to-achieve-your-financial-goals/) to help you achieve the next steps. Whether you decide to rent or buy a home, there will be financial responsibilities [you will need to calculate](https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator)<a href="#four">^[4]</a> and work into your monthly budget to ensure you’re making the right choice for your situation. ## What’s right for you isn’t always right for everyone else When it comes to renting a home vs buying a home, you have to choose to march to the beat of your own drum. The process of finding a rental home, or a home to purchase can be equally exhausting and confusing. Keep in mind that just because the people around you are choosing to rent or to buy does not mean you need to make the same choice. Where you live and the lifestyle you choose is truly up to you and allowing yourself to be influenced by the people around you regarding something as personal as the place you call home could have unpleasant consequences. Keep in mind that no matter which option you choose, nothing has to be permanent if you don’t want it to. You can rent for several years and then buy a home. You might purchase a home and then sell after a few years to go back into a rental that better suits your needs. The choice between renting or buying a home is yours. Sources: <div id="one">^[1]Williams, Jeff (2021, May 17). *Renting vs. Buying a Home: Which Is Smarter?* Retrieved from: [https://realestate.usnews.com/real-estate/articles/renting-vs-buying-a-home-which-is-smarter](https://realestate.usnews.com/real-estate/articles/renting-vs-buying-a-home-which-is-smarter) <div id="two">^[2] Hoffower, Hillary (2019, July 29). *Millenials aren’t buying homes, and it might not be because they can’t afford them: Some actually prefer to rent instead* Retrieved from: [https://www.businessinsider.com/millennials-renting-homes-instead-of-buying-2019-7] (https://www.businessinsider.com/millennials-renting-homes-instead-of-buying-2019-7) <div id="three">^[3]Sumner, Sarah (2021, July 29). *A Guide on How to Rent a House or Apartment* Retrieved from: [https://www.speedycash.com/resources/508/saving-money-tips/a-guide-on-how-to-rent-a-house-or-apartment/](https://www.speedycash.com/resources/508/saving-money-tips/a-guide-on-how-to-rent-a-house-or-apartment/) <div id="four">^[4]Retrieved from: [https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator](https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator) <div id="five">^[5]Mullins, Luke (2015, March 10). *Why Owning a Home Is More Expensive Than You Think* Retrieved from: [https://money.usnews.com/loans/mortgages/articles/why-owning-a-home-is-more-expensive-than-you-think](https://money.usnews.com/loans/mortgages/articles/why-owning-a-home-is-more-expensive-than-you-think) <div id="six">^[6]Siegel and Wright (2022, September 1). *Rising Rent: Why Prices are Only Going Higher* Retrieved from: [https://www.washingtonpost.com/business/interactive/2022/rent-inflation-housing/](https://www.washingtonpost.com/business/interactive/2022/rent-inflation-housing/)