Homeownership is a goal for many Americans, especially those who live in cities with very high rent. However, there are pros and cons to both renting and owning a home. The advantages of renting may outweigh the disadvantages in some parts of the country, while in others, it makes much more sense to own. Our credit counseling advice is to consider the pros and cons of renting vs owning a home before making a decision.
Pros of Renting a Home
- It is generally cheaper to rent than to buy. If you aren’t in a position to save up thousands of dollars for a down payment on a house, it may be better to just continue renting for the time being. Additionally, you are not responsible for the repairs and maintenance when you rent. If you have a leaky washing machine or broken air conditioner, your landlord is responsible for taking care of these potentially expensive repairs, not you. You also don’t have to pay property taxes when you rent. If you’re currently working on debt management, renting might be a better choice for you.
- Moving is easier when you’re a renter. If you decide you don’t like the place where you live anymore, it’s far easier to move if you’re a renter rather than a homeowner. You can just pack your things when your lease is up and find a new place. As a homeowner, you have to worry about selling your house and all the headache that comes with it.
- There’s no risk of making a bad investment. Buying a house can be risky, as many homeowners learned during the housing crash of 2008. When you rent a home, there is no risk because you don’t own the home, which could potentially be a depreciating asset.
Cons of Renting a Home
- Your landlord could increase your rent. If you plan to renew your lease, there’s no guarantee that your rent will stay the same. Your landlord could raise your rent, and you have no control over that.
- You may not be able to make alterations on the property. Because you don’t own the apartment or house you are renting, you can’t make changes to it. That means if you hate the color of the walls, you probably won’t be able to paint them or add your own personal flair to the property.
- Renting doesn’t build equity. Your landlord is getting richer when you pay the rent, but you don’t have anything to show for it by the time your lease is up. Some people consider renting “throwing money away,” because you aren’t investing in anything and you’re building someone else’s wealth instead of your own.
Pros of Owning a Home
- Your mortgage payments are fixed. Your monthly payment on your mortgage doesn’t change from year to year, so it’s easier to budget and plan around this fixed cost. You never have to worry about an increased cost like renters do with landlords.
- You can make changes and customize your home the way you like it. If you decide you want to renovate the kitchen or paint your bedroom walls, go for it! You own the house, so you don’t have to ask anyone’s permission, unlike renters.
- Real estate is an investment. Owning a home builds equity as the value of your home appreciates over the years. You can potentially make a lot of money off of your home if you plan to sell it later, so homeownership usually has a good return on investment.
Cons of Owning a Home
- The upfront costs of purchasing a home are expensive. Ideally, you should save up for a 20 percent down payment. It can be difficult for some people to save up that much money and to qualify for a mortgage in the first place if their credit isn’t good.
- You are responsible for the cost of maintenance and other fees that come with homeownership. If your roof is in need of repairs, you are the one that has to pay for it to get fixed. You will also have to pay property taxes every year. There are other costs that you may be responsible for too depending on where you live, like HOA fees.
- There is always the risk of your home decreasing in value. Unfortunately, you can’t control the future of the economy, so you can’t know for sure if your home will increase or decrease in value.
Renting vs Owning a Home – Final Thoughts
The decision to buy or rent a home depends on your financial situation, where you live, and what your long-term goals are. Homeownership isn’t for everyone, especially people who would prefer to move to different cities and don’t want to be tied down. Renting also might not be the best decision for someone who wants to build equity over time and put down roots in a community. Think about your own wants and needs to determine the best decision for you!
If you’re struggling to pay off debt, ACCC can help! Schedule a free credit counseling session today.