A hallmark of the American Dream, buying your own home, is viewed by many as a rite of passage into manhood. But is buying a home always better than renting, or are there times when renting is actually a better choice? Consider some of the pros and cons of buying versus renting below.
Pros of Buying
- Buying a home can give you emotional satisfaction, bringing you a sense of pride, security, independence and fulfillment.
- The longer you stay in a home, the more savings you will have in the long-term. One of my favorite tools for analyzing savings in buying versus renting is The New York Times Buy or Rent Calculator.
- As you make mortgage payments you build equity, meaning you actually have a chance of seeing your money again, unlike renting.
- Owning a home gives you more choices. You can have more space, including a yard that you control completely. You can also choose to paint or decorate any way you want.
Cons of Buying
- Buying a home takes a larger amount of money upfront. You need to be able to make a reasonable size down payment, as well as covering at least some, if not all of the closing costs. There are usually more fees than most realize when finalizing the sale of a home.
- Owning a home makes you a lot more fixated and a lot less flexible. If you don’t plan on staying in the area for at least five years, don’t buy. If you need to move, you have to keep paying until you can find someone else to buy, which can be a real pain.
- Services are not included at a home like they are in an apartment. You may find yourself having to pay for trash pick-up and utility bills you might not have had at your apartment such as natural gas. Water and electric bills are usually higher since you have more space and are now caring for a yard as well.
- Maintaining a home can be a beast. There is always something to be done at your home from caring for the yard to fixing a broken faucet and more. While these are great opportunities to buy new tools and learn new skills, they also tend to take up entire weekends.
Of course buying doesn’t always mean a home – you could buy a condo in which many of the same things as in an apartment complex are taken care of, such as the maintenance. However, condo association fees are usually high, and you lose the pros of greater flexibility and freedom of choice in how you care for your living space.
Pros of Renting
- Renting usually means a year lease, which is great for people who want to be flexible and mobile.
- In the short term, you save more renting than buying. If you are only planning on living in an area for a couple of years, you’re better off renting. Again, check out the handy The New York Times Buy or Rent Calculator.
- Less time and money spent on maintenance is another big plus for renting. When something goes wrong all you have to do is phone the landlord to take care of it.
- Monthly costs are generally lower, since renter’s insurance is cheaper than homeowner’s insurance. Utilities, and even maintenance if you have to pay for it apart from the rent, are usually at a reduced rate since you are sharing the bill with other tenants.
- Apartment complexes also have perks that your home likely won’t have, such as a pool, a gym, and in some cases tennis or basketball courts.
Cons of Renting
- Once you pay your rent, you never see that money again. You’re not building any equity – it’s simply a sunk cost. And while that may not be a big deal in the short-term, in the long-term it can break you.
- At an apartment you have little or no control over your property. You’ll have to ask before painting, hanging things on the walls, or making any changes to the apartment.
- When renting you will also have to deal with annual rent increases and there aren’t as many tax benefits as there are for homeowners.
- Neighbors everywhere makes renting difficult. You not only have to put up with them, but you have to be mindful of them, which can be a pain in any number of circumstances. While the same is true in a home, in apartments your neighbors are much, much closer.
Renting doesn’t always mean an apartment – you can rent a home which will give you more space and may allow you to have more freedom with the yard while still providing you with the benefits of having a landlord to take care of bigger problems.
Great article. My b/f and I are actually looking to move into a new place in the DC area and the subject came up of possibly buying. It’s good to see the pros and cons fleshed out, so we can make that decision. I think we’re going to keep renting for now.
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