We are homeowners for 3 years now. A lot of things changed in our lives since I first calculated buying vs. renting home. We are a family of three now, this blog is generating more revenue. Cost rent went up in our area, compared to the cost of owning. I have a stable job where I am happy and appreciated. And, not looking to move anytime soon.
If I look back now, we took the plunge to call someplace our own, we wanted to give our son a little more space and at the same time, we wanted to be closer to nature. We have a suburbian south Florida water-front home, with Mango, coconut, and palms trees.
We have a little fish pond and plenty of space to do gardening. We grow some vegetables and our garden is full of flowers, blooming all year.
Now, you! Should you rent or buy your home?
But your mileage may vary, you may not be in the same situation as we are in, renting may be a better option for you or maybe owning a home is better. So, should you rent or should you buy?
When looking for your first house, you might be wondering whether it is better to rent or buy. If you are weighing the pros and cons of owning your own property versus renting, here are some things to consider:
Borrowing vs. Owning
If you are happy living in a house owned by another person, consider renting. However, if you want a property that belongs to you, buying is the best option. When owning a house, you can make as many improvements as you want without asking for permission.
The apartment where we were renting last, we weren’t allowed to put a nail even, without talking first.
Some landlords do not even allow tenants to have children or pets, which means starting a family will be a reason to move. However, renting allows you to move as soon as your tenancy period expires. As a buyer, you have the freedom to own as many pets as you want.
Mortgage vs. Rent
If you choose to buy a house, a large chunk of your cash will go towards paying the interests on your loan, which is why mortgages take a long time to repay. However, renting allows you to have flexibility in case your circumstances change.
For instance, if your monthly income reduces, you can move to a low-rent apartment.
Moreover, you have a wider choice of places to live in when renting. The downside is that you will be paying rent every month without getting anything from the investment. Depending on your location, rent might be more expensive than monthly mortgage payments.
Investment vs. Extra Cash
If you want to pay lower mortgage rates, you need to put down a deposit on the house. You should have at least 5 percent the value of the house. When you save for a larger deposit, you will pay lower monthly rate.
On the other hand, renting does not have huge upfront costs, which makes it easier to jump in before saving money. However, you might have to pay a month’s rent in advance to show your seriousness. If you prefer to make an initial deposit that will act as an investment, consider buying an apartment.
While buying our home, I paid 20% down payment, that was $56,000, had I invested that sum, I would have got some positive return.
But see this way, I spent $56,000 to buy real estate rather than investing in stocks or ETFs. Our then home price was $320,000 now it’s at $428,000 as per latest Zillow Zestimate. I would say the investment returned in a big way, in just 3 years.
That’s the beauty of real estate investing! The value of your home mostly goes up in the long run.
Responsibility vs. Freedom
Buying a house comes with great responsibility, which means that if something goes wrong you have to fix it. Doing repairs comes with a large price tag you might not be willing to take on. However, renting means the landlord is responsible for making sure all problems are fixed.
If you do not have extra money to cover the repair costs and are not DIY-inclined, reconsider your decision to buy a house. However, renting means you will be at the mercy of your landlord – if he wants to sell the house, you will have to move out.
There are other hidden costs of home ownership that you can’t ignore. Costs like, property taxes, home insurance, flood insurance, home maintenance, HOA fees, etc.
We had a costly roof repair already and the roof can last at most 5-6 more years. Having spent $4,000 towards the roof and $6,000 towards a new AC unit, we feel the pain associated with home ownership.
While renting we just had to call our landlord in case of a leakage os AC problem. For any home maintenance, we go into Angie’s list, call contractors for quotes, then select one to do the job. We take time off from office to see their work. It’s very time consuming indeed.
Renting vs. Buying
In the end, your budget and lifestyle will determine the best option for you. Because each option has pros and cons, your decision will change as your situation changes. If you decide to rent, you need to look at the renter’s insurance carefully. If you are considering renting in New York City, you can find more info about one option here.
On the other hand, if you want to become a homeowner, start figuring out how much you can afford to borrow as well as how much you need to save. The more you save, the lower your mortgage rates are likely to be. Moreover, putting up a big deposit means no mortgage insurance.
If you need more details to make this decision, contact a real estate agent for some advice.
A homeowner has so many expenses that a renter doesn’t have that sometimes I think I would have been better off by continuing to rent. But those are momentary thoughts
Each day when I go home from the office and have a cup of tea on our patio looking at the lake and ducks and numerous birds and squirrels, I feel proud of my decision to buy this home.
Life of a homeowner is so different from a life of a renter. Should you rent or buy your home is your decision, I just tried to explain the different angles that you need to cover before makign that decision.
Readers, what other points you’d like to bring up in the discussion?