To rent or to own a home; which is better?

Buying a house is a huge part of any person’s dreams. Choosing to buy or rent, though, is a major decision that affects your financial health, lifestyle, and personal goals.

Whichever option you choose depends entirely on your lifestyle and financial situation. Both require a regular income (so you can afford the payments and associated costs) and may also require a certain degree of effort to maintain.

But there are several differences that make renting and owning property distinctly different. Renting a property doesn’t come with all the responsibilities associated with homeownership and you have more flexibility, as you aren’t necessarily tied down to your property.

Owning your home gives you a sizeable investment, but it does come at a big cost—both upfront and over the long run.

Owning a home isn’t always better than renting, and renting is not always as simple as it seems. Here, we highlight some of the key differences between renting and buying.

Key takeaways
Whether you choose to rent or buy your home depends on your financial situation, lifestyle, and personal goals.
Both provide you with a place to live and require regular income in order to make the payments.
Renting offers flexibility, predictable monthly expenses, and someone to handle repairs.
Homeownership brings intangible benefits, such as a sense of stability and pride of ownership.
Renting doesn’t mean you’re throwing away money every month, and owning doesn’t always help you build wealth in the long run.

Renting a Home
The biggest myth about renting is that you’re throwing away money every month. This is not true. After all, you need a place to live, and that always costs money in one way or another. While it’s true that you aren’t building equity with monthly rent payments, not all of the costs of homeownership always go toward building equity.

When you rent, you know exactly your housing costs each month. This amount is indicated in your agreement so you can plan accordingly. In some cases, your landlord may also include other costs within that amount, such as utilities, security etc..

As a renter, you may face rent increases each time your lease is up for renewal. These rent increases can be even steeper if you live in certain parts of town.

Renting means you’re able to move whenever your lease ends. However, it also means you could have to move suddenly if your landlord decides to sell the property. Less dramatically, they could just bump up the rent to more than you can afford.

Owning a Home
Homeownership brings both tangible and intangible benefits. Not only do you have your own home, but you can make decisions about the look and design of the space, and you also get a sense of stability and pride of ownership.

Keep in mind, though, that changing your mind about where you’re living can be very expensive since real estate is an illiquid asset. You may not be able to sell when you want. And even if you do, you may not get it at the price you want, especially if the housing market is down. Even if it’s up, there are significant transaction costs associated with selling your property.

Verdict

The overall cost of homeownership tends to be higher than renting even if your mortgage payment is lower than the rent. Here are some expenses you’ll be spending money on as a homeowner that you generally do not have to pay as a renter. And let’s not forget repairs and maintenance, which can be very costly. You may find yourself with an unexpected leak in the roof.