Most of us are earning with the common dream of owning a house. But have you ever wondered why nobody thinks of renting them? Renting vs buying a house – both have a significant impact on all our financial decisions, personal goals, and overall lifestyle. Most importantly, they need a saving of most portion of one’s income.
As our elders say, buying a house is always better than renting. But renting is not a very simple endeavor. To give you a sense of relief, I have come up with yet another article. Go through it and discover the primary differences between owning a home and renting it.
What’s Renting A Home?
One of the common myths about house renting is that you have to make monthly payments. But is that true? When you want a place to thrive, it comes with a certain cost. The decision is all yours- whether to pay it at once in a lump sum amount or make monthly installments.
Again, it is true that out of monthly rent payments, you are building no equity. Not every homeownership cost contributes towards equity building. And that’s one big difference between renting vs buying a house. At times of rent, you are well aware of how much it will cost you every month.
Further, this amount gets reflected on your lease, and you might plan accordingly. Some circumstances also let the landlord include additional costs with the same amount, like storage and utilities. Being a renter, you might have to experience rent increases with every lease renewal. So, whenever you choose a home in the rental communities, it is best to know every cost beforehand. It can help you make a well-informed decision and plan your budget effectively.
Owning An Abode- What’s That About?
Owning a home has tangible as well as intangible perks. You get to own your own abode, make decisions about its design, and look along with a sense of stability. But you also have to think about accumulating a lumpsum amount at a particular time. Based on the location, your illiquid asset can cost you significantly.
Additionally, there comes a fear that you cannot sell it whenever you desire. Among the major considerations of renting vs buying a house, getting concerned about its ownership has always remained on top. As a homeowner, you might have to dedicate your time towards certain expenses such as:
- Property taxes
- Sewer and water service
- Trash pickup
- Trimming down trees
- Pest Control
- Cleaning Swimming Pools (although additional)
- Home Insurance
- Natural Calamities Insurance
Additionally, the cost of repair and maintenance goes beyond saying. So, make a clear move once you are done considering these factors.
Renting Vs Buying A House: Key Differences
For a lot of people, purchasing a home is simply a part of their entire investment decision. The money they spend on rent is usually considered an investment that will never pay off. But that’s not the only consideration here. Let’s take you to a complete picture of the differences between purchasing and renting a home.
1. Real Estate Worth
As already mentioned, homeownership is a great method to build and circulate wealth. However, like other forms of investments, some factors can either negatively or positively impact your property’s value. Some of them are:
- Financial issues
- Environmental issues like hazardous waste sites or landfills nearby
- Maintenance costs
- Old and tarnished interiors
- Exterior conditions
These factors impact not only a house owner but also a renter. For example, negative factors can bring down the rental charges. There are instances when the landlord is desperate for money and may slash the monthly rent.
2. Tax Benefits on Renting vs Buying a House
Tax benefits might have a positive influence on homeowners. Any miscellaneous or out-of-pocket expenses can be instantly reduced with the home mortgage interest deduction. Especially when the loan is in its early life and has not been itemized yet.
It is worth mentioning that you receive no mortgage tax deduction in case you rent a property. Although, you might still gain the standard deduction that is constant for all taxpayers. Even homeowners have to go through this when they do not have adequate deductions for individual itemizing.
3. Maintenance and Repairing
I have stressed the fact enough that being a house owner simply makes you responsible for repairing and maintenance. But what I haven’t stressed enough is that it might be expensive. Renting vs buying a house is also about considering the maintenance cost and making decisions regarding it.
For every homeowner, maintenance can cost a few bucks each month. In the case of a rented property, all these headaches have to be taken by the landlord. Whether an owned home or rented- there are some stuff that you have to take care of. But it is sometimes better to refrain from taking extra responsibilities!
4. Mortgage Interest
Based on your employment and credit history, the interest rate you receive can tentatively differ. Further, you might also make an option between a variable and fixed rate loan. The best part about mortgage payments is that they generally remain consistent over a period of 30 years.
In the initial years of the mortgage, a major portion of your payment goes to the interest. On the other hand, your payments will be dedicated to the principal at its end. Initially, in your mortgage interest, the outstanding loan is different for renting vs buying a house.
5. Time Commitment
Homeownership is a matter of time commitment. If you are one who stays mostly abroad or likes spending weekends without work calls, this might not be the best option for you. Buying a house always comes with a set of scheduled projects that require your time as well as attention.
Consider a plumber who has come to replace a rusted-out pipe or a painter who is waiting to redo the bedroom.
But that’s not the case with renting. Most of these jobs are done before you move in. Only if you stay for a long time in the same rented house the homeowner might ask you for these small transformations. But that’s a rare occurrence.
Ending The Debate- Renting Vs Buying A House…
Purchasing or renting a house- both are huge financial decisions. It is about everything, from your comfort to your futuristic vision. One might not have enough savings to buy a house now, which is why they are paying rent. But they might want to buy a house later.
No matter what it is, you must always consider every small factor that influences your decision. Along with the risks come their individual benefits. Hope this article helped you walk through the multiple aspects of buying a home and renting it. Don’t forget to share your thoughts on this.
Read Also:
