Should you buy a property if you can or are you better off renting instead? Owning a home, no doubt, can increase your net worth. However, there are downsides to home ownership in the form of expenses such as a down payment and closing costs, hassle with paper work and a long-term mortgage that needs serious commitment. In this article, we break down the pros and cons of buying and renting.
Pros of home ownership
- Equity – When you pay rent, only your landlord benefits from a mortgage payment and higher net worth. However, every time you pay your home mortgage, your degree of home ownership increases.
- Decorating freedom – When you own your place, you can decorate it the way you want to, without worrying about hammering away the walls or painting the ceiling orange.
- Maintenance decisions – As a home owner, you can call the shots about DIY maintenance activities or hiring the professional contractor of your choice.
Minuses of home ownership
- High upfront costs – Buying a property comes laden with costs – down payments, mortgages, closing costs, agent commissions, insurance, home inspection fees and documentation charges.
- Inflexibility – Unlike a rented house that you can move out of whenever you want to, owning a home comes with responsibilities towards its upkeep and making payments on the mortgage until you decide to sell and ultimately find a buyer, which can be a long drawn process in itself.
Pros of renting
- More savings than buying in the short term – Unlike property ownership, renting has few upfront costs. It usually takes a homeowner five or more years of regular mortgage payments before he/she can begin to see the savings. So, if you plan on only staying in a location for five years or less, you’ll probably save more money renting.
- No maintenance costs – When the plumbing system is repaired, all you need to do is call the landlord.
- Time to build good credit – Making on-time rental payments will help you build the solid credit history you’ll need to qualify for a mortgage.
- Flexibility – Renting allows you to explore an area before making the long-term commitment to property ownership and gives you the time you need to do your research about a specific neighbourhood.
Cons of renting
- No control over the property – When you are a tenant, you will have to give up some freedom to do what you want with your place.
- No equity – What you pay as rent every month is money you will never get back.
- Rent increases – Your monthly mortgage payment is likely to stay the same year in and year out, while rent increases can outpace inflation.