Which is Better?
Many people still do not know the result of the age-old argument of buying a house versus renting. Overall, it depends on the person’s financial goals. Buying a house is more beneficial in the long-term while renting is easier in the short-term.
Benefits of Buying a House
When people buy houses, it is generally assumed that they will live there for at least a few years. During those years, they hope that their investment will grow as the house accumulates. The homeowner can make improvements to the house to increase the value. Some costs, such as the mortgage interest, can be claimed on federal taxes for a tax deduction.
As well, owning a house gives people a sense of stability and a greater feeling of community, knowing that they will be settled there for a long time to come.
Downsides of Buying a House
If someone’s circumstances were to change unexpectedly, and they had to quickly sell their home, they might lose money. If the house had depreciated in value, there is no recouping the money that was put into it, or the additional buying cost.
As well, people may not be able to sell their homes, depending on the current real estate market conditions.
Homeowners also get saddled with many additional costs, such as property taxes, maintenance, and home insurance. Even though the mortgage interest can be deducted, it can be very expensive. The mortgage payments for the first few years are mostly comprised of interest, which means that the principal payment is not decreasing by very much. This can come as a surprise to some when they try to sell and realize that they have not paid off as much as they think they have.
Benefits of Renting
Renting is an option that might appeal to people who enjoy moving around. Every time a lease is up, a tenant can simply pack up and move onto the next spot that they fancy.
Most tenants do not need to deal with any maintenance or fixes on the property, as they simply call their landlords to come and sort it out.
In addition to this, renting costs tend to be more predictable than a homeowner’s costs. This makes things easier to budget and plan towards financial goals.
Downsides of Renting
The major downside of renting is that you are not building equity of your own. Your monthly rent is going towards paying somebody else’s mortgage.
In addition, every time that your lease comes up for renewal, the landlord may raise it. This is assuming that it is not in a rent-controlled area. Similarly, to this, a landlord has the right to evict you whenever the lease is up for renewal. This might happen if they want to sell the property, or if they want to demolish the house to build someone else.
Also, while it is true that the landlord will cover the fixes and maintenance, there is no guarantee of when this might happen, or if it will be repaired in a satisfying manner to you.