The buy versus rent debate is the current hot topic when it comes to housing and personal finance. However, I think a lot of people get too caught up in the numbers. Yes, numbers are important, but what is even more important is that buying or renting a home is a lifestyle choice in addition to a financial choice. You shouldn’t make your decision on one only one of these factors. You must consider both.
Renting and buying a home are two totally different beasts when it comes to money. Renting offers a fair amount of financial certainty when it comes to your housing expenses. You will know exactly how much your rent will be for the period of your lease and you won’t likely have to pay much else for your basic housing costs. When you buy a home, your mortgage payment will stay close to the same if you have a fixed rate mortgage, but it may increase or decrease based on changing real estate taxes and insurance rates. If you have a variable rate mortgage, the payment can change as interest rates change.
Utility expenses are another large cost that are associated with your housing. If you rent, you might luck out and have some of your utilities included in your rent! However, if you buy a home, you’re stuck with all of the utility bills in most cases. The benefit of owning a home is the fact that you can make your home more efficient with regards to heating, cooling, electricity and water usage if it is a smart financial move. As a renter, it wouldn’t make sense to make these improvements as they’d likely be cost prohibitive.
Yard maintenance is sometimes covered in your rent as a renter and could potentially be included in homeowners association fees if you own a home. However, this particular cost will vary widely depending on your specific situation regardless of whether you’re a renter or you buy your home.
Regular home maintenance is almost always paid for by your landlord if you’re renting. If you own your home, you need to make sure you can afford all of the maintenance that is necessary or your home could end up losing value quickly. Even with all of these financial considerations, you still need to consider the lifestyle choice you’d be making when you choose if you’ll rent or if you’ll buy a home.
Once you take all of these factors into consideration, you should have a good idea if buying or renting will be cheaper on a monthly basis. If buying ends up cheaper, remember that you’ll have to include money for a down payment and closing costs as well. Unfortunately, the better financial decision doesn’t always make sense when you consider your lifestyle.
The secret that will help you make a sound decision about whether to buy or rent is matching your finances with your lifestyle. Owning and renting a home are two very different lifestyle decisions. If your lifestyle doesn’t fit your choice, you could end up in a world of hurt financially.
The first lifestyle choice is the length of time you’ll live in a home. If you’re not sure where you’ll be in one year, let alone five years from now, then you’re most likely better off renting a home. You can sign short leases and minimize the financial impact a mobile lifestyle would have on your wallet. However, if you’re certain you’ll be in a particular area for decades, you might want to put down roots and avoid the costs of rent increases and moving every couple of years when your landlord doesn’t want to renew your lease.
If you hate yard work and performing maintenance tasks around the house, renting will definitely fit your lifestyle better. Since these things aren’t normally the responsibility of the renter, you’ll alleviate that stress on your life. If you live for having the perfect yard, you probably would want to own the home so you don’t spend a ton of money fixing up a yard before the landlord decides not to renew your lease.
As you can see, deciding whether to own or rent a home isn’t a simple decision. It takes a lot of reflection on your situation to determine what is best for you. Don’t let others bully you into a situation you aren’t comfortable with and do what’s best for you!
What do you think about the buy vs rent debate? Which side to you fall on, or do you run the numbers for every scenario?
Photo by: Smith Text added by: Lance Cothern