Your living arrangements aren’t something you should take lightly. There are many differences between renting and buying a home that you should consider.
But is one more affordable or beneficial when it comes to renting vs buying a home?
We’ll review the benefits of each, if it’s worth it to buy a home, the pros and cons, and lastly—what to do if you’re ready to buy a home.
The differences between owning and renting a home
The differences between renting vs buying a home can be split into three categories:
- Current lifestyle and goals
- Financial Situation and goals
- If you’re ready to invest and commit
Current lifestyle & goals
It’s essential to think about your current lifestyle and goals, such as where you see yourself in the next 5-10 years, before you decide to buy a home.
If it’s the right time to settle into an area, then purchasing a home may be a better option. When you buy a home, you’re making a long-term commitment to stay in the home.
However, if you’re unsure of your plans, then renting may be best—for now.
While renting, you can move cities without making too long of a commitment. Some properties may offer short-term leases such as month-to-month or 1-2 years. If you’re young and want to travel or aren’t sure where you’ll put down roots just yet, there’s nothing wrong with renting.
Ultimately though, you’ll want to own property to build your own personal wealth and not a landlord’s.
Financial situation & goals
Quite simply, the most apparent but considerable difference between renting and buying a home is the funds required upfront.
A home mortgage can have advantages but can also be costly. There’s the down payment, closing costs, and other fees to consider on top of your monthly mortgage payments.
A mortgage calculator can help break down what kind of costs to expect on a monthly mortgage, such as the monthly payment, the insurance and tax, the PMI, and the principal and interest.
You’ll then add in your other monthly bills to figure out how much you can afford to pay on a house payment.
Often, mortgage payments are comparable to or lower than most rent payments. Rental payments, however, sometimes include certain bills such as utilities, water, or internet.
Depending on your type of mortgage loan, the amount due is usually the same each month whereas your landlord could raise the rent at any time.
The bottom line is that a monthly mortgage payment isn’t always higher than what you’d pay to rent, but they do require more upfront costs.
Are you ready to invest?
As we already said, purchasing a home is a long-term investment. And when you take on an investment, there can be many risks and rewards.
If you’re ready to apply for a mortgage to purchase your dream home, you should consider the type of mortgage, the housing market, and if you’re ready to commit to one area.
The housing market and your mortgage go hand in hand. The housing market rates play a variable in what type of interest rate you may be eligible for, as well as what you end up paying for a house. While the market’s not the only factor, it’s pretty influential on what you may be paying for 7-10 years.
If you’re not ready to commit to a home or aren’t sure what direction your career is taking, renting may be a better route. You can adjust your housing needs based on your lifestyle and financial situation.
As a renter, is it worth it to buy a house?
Whether buying a home is worth it depends on what you’re looking for and what’s feasible for you long-term. Let’s run through the steps and possible outcomes of each to provide a better picture of what you can expect.
Buying a home
The initial steps to purchase a home include:
- House hunting
- Making an offer
- Official mortgage application
- Approval and underwriting
After that, you’re an official homeowner!
This means you own the property and can make any modifications your heart desires; you can re-do a room, update appliances, install a pool, or even add-on to the home.
However, you’ll have to maintain the house yourself. So if your washer breaks or the A/C isn’t working, then you’ll have to make all the arrangements rather than relying on a landlord, which can be both a pro and a con.
You’ll also have to stay on top of your monthly mortgage payments, so you don’t risk foreclosure. Lastly, if you outgrow the home or need to move, you’ll have to plan for selling this home and buying another. Depending on the market, however, you may be able to set yourself up nicely for your next home by building equity and accruing value on the home.Check your mortgage options
You typically have to apply to rent a property and get approved.
Since you’re renting a space, you’ll have to rely on the landlord for a suitable living environment. You might not be able to make many modifications or changes, but you won’t have to worry about maintenance and upkeep.
Rent control isn’t available everywhere, so a landlord could choose to raise your rent when they want. If you need to break or extend your lease, that may also affect the monthly payment.
When you’re ready to move out, you may also be charged additional fees for any damage or wear and tear.
All of these payments that you’re making are going into the landlord’s pocket. The upfront costs to buy a home may seem expensive, but it’s an investment in yourself and your own wealth rather than someone else’s.
Renting vs. buying a house: pros and Cons
We’ve already reviewed a few pros and cons of renting vs buying a home, but you should consider a few other note-worthy factors.
Pros of renting
- Short-term commitment
- Little to no maintenance repair and costs
- Flexible lifestyle
- No taxes
- No additional debt
Cons of renting
- Usually can’t renovate, update, or customize the space
- You can’t add to your wealth by building equity
- No tax breaks
- Rent is out of your control
- Additional fees, such as for owning pets
- Reliance on a landlord
- Lack of privacy/outdoor space
Pros of buying a home
- You own the property
- Long-term wealth investment
- Can renovate, update, and customize as you please
- Consistent monthly payments
- Tax incentives
- Build home equity
- Secure housing on your own terms
Cons of buying a home
- At least a 15-year commitment to one area; or
- Must arrange the sale of the house to move before then
- You’re responsible for the upkeep, maintenance, and repairs
- Must pay other monthly bills on top of the mortgage, such as water and utilities
- Closing costs, insurance, down-payment and other payments needed upfront
Are you ready to buy a house?
If you’re ready to take the next step and purchase a home, reach out to one of GO Mortgage’s qualified and experienced mortgage advisors.
They can review your information, such as your debt, employment, and income to determine what type of loan product would be best for you.
We want to help you obtain your dream home, which is why our mortgage products are competitive and flexible.Reach out to us today to learn more.