Having your own place that you can consider your home is one of the lifelong goals of almost everyone. To achieve this, we are presented with two main options: renting or buying. Many people seem to prefer homeownership. But many rich people still rent. Both renting and owning have their respective advantages and disadvantages. So should you rent or own?
Renting a Place
1. You cannot make changes to your rental home’s facade. Of course, you do not own it, so you cannot make permanent changes to the exterior.
2. Increase in monthly dues. Once your lease agreement expires, or if you don’t have one, the landlord/lady has the discretion to increase your monthly payment. This can be burdensome if you have a tight budget for rental, and you might have to look for another place.
3. The are rules you have to follow. If you are a pet owner eyeing a great apartment, you’d better ask whether pets are allowed. If you also love grilling outdoors, some apartments forbid doing so on the patio or balcony.
4. You cannot build equity. As the months or years pass, you aren’t getting any closer to owning the place you are living in as it goes directly to your landlord’s pockets.
1. The upfront cost is significantly lower. When you decide to rent, you can quickly get the keys to your new place and move in right after a security deposit of just a month’s rental cost.
2. You’ll save a ton. When renting, you don’t have to pay the home associations fee. You need not shell out more money to fix the roof or the window, or when any part of your unit or house needs fixing, you just have to inform the landlord about it, and they will take care of it. Several rental homes also include furniture and appliances, so you won’t need to buy as well.
3. Flexibility. You can move from one city, state, or even country to another if you want or need to. Since you will only be shelling out money for a month’s rent every month, you are not tied down to one place and can live in many places. Renting is great if you travel a lot.
4. Access to amenities. You can get access to a pool, gym, garden, and other amenities that would otherwise take a lot more if you buy a unit.
Owning a Place
1. High cost. According to U.S. Census Bureau, the median asking sales price for vacant for-sale units was $238,600 in the second quarter of 2021. That’s a lot of money to get out of your pocket and put into a single purchase. This excludes other expenses such as appliances, furniture, redesigning, and other home modifications you’d like to incorporate.
2. High upfront cost plus interest rates in amortization. With a mortgage, you’ll have to pay 20% of the total cost of the house upfront. Add in the respective interest rates for your monthly amortizations depending on the period you’d like to cover the remaining balance.
3. Hidden costs. Property tax, homeowner’s association dues, needed home fixes are just some hidden costs of owning.
4. Longer commitment and lack of flexibility. You will be tied down for 5 to 10 years or more decades to one location.
1. Fixed-rate mortgage. Compared with renting, wherein the landlord dictates the amount, you get a fixed down payment rate and amortization.
2. The equity increases as the years pass. Should you decide that it’s more suitable for you or your family to own but find your running balance lacking, you can contact a mortgage broker to make the process seamless. Unlike renting, you get to own your place bit by bit as you pay for the down payment and amortization
3. Freedom to build and renovate. Once you’ve got the down payment and a certain portion of amortization covered, or you’ve bought the entire house/unit, you can already build/renovate the interior and exterior according to your preference.
4. Good long-term investment. Although some real estate properties depreciate, this seldom happens. A house or unit is an asset since you can sell it at a much higher price several years later.
According to the survey conducted by the U.S. Census Bureau on the residential vacancies and homeownership statistics for the second quarter of 2021, the homeownership rate is 65.4 percent. This is not statistically different from the rate in the first quarter of 2021, which is 65.6 percent.
Based on this data, we can see that many Americans are leaning towards homeownership. Now that you’ve seen the pros and cons of renting and owning, should you be part of such statistics, or would you still prefer to rent? It still boils down to your needs and financial capability, and stability.