Renting vs. buying a home isn’t a matter of ownership. Here are other key differences between the two options.
Homebuyers can capitalize on the equity of their home accumulates over time. That means if the home’s value goes up, you’ll cash in on the higher value when you sell. Plus, with a fixed-rate mortgage, you won’t have to worry about rising rents.
“Interest rates are so low now,” That means borrowing money is very inexpensive today. In some cities, where rents are high, it can almost be as affordable to purchase as to rent in many parts of the city. If you can qualify for a home and build some equity, that ultimately makes more sense than renting.
Another factor for buyers to consider is whether you will be able to deduct the mortgage interest at tax time. Tax laws allow those who itemize their taxes to write off their mortgage interest payments. However, not everyone is eligible to itemize deductions, and changes to the tax laws mean that more people won’t be able to deduct as much of their mortgage interest and property taxes as they used to.
Homes need repairs and maintenance over time, and when you’re renting, those costs are generally the landlord’s responsibility. For instance, in an apartment, if the HVAC system or refrigerator breaks, the landlord has to fix it. On the other hand, as a homeowner, you’ll be on the hook for those repairs and ongoing seasonal maintenance, and they can add up fast.
If you’re moving to an unfamiliar city, have an unstable job situation or don’t know what neighborhood will feel like home, renting for a period of time can be a great option.
During that rental period, people really get a sense of what they like or don’t like, and we can also start exploring different purchasing options during that time,
While no one has a crystal ball, it’s important to evaluate your current life situation and how much it’s likely to change in the immediate future.
I recommend clients who are going through life changes, like divorce or downsizing, to rent as a way to decompress before making a large purchase that may not be right for their new lifestyle.
For clients who have a changing personal situation, such as getting married or planning to have a child soon, I encourage them to look at properties they’re not going to outgrow quickly. Another consideration: Can you afford a home that will fit your lifestyle in the next few years, or will a tight budget limit your options?
It may be better to wait or rent for a little while until they can afford the home they can live in for some time or grow into with their family.
It may be helpful to talk with a trusted real estate agent to help you think through the decision to rent vs. buy a home. Here’s a list of pros and cons to help you on your way.