One of the most significant decisions we need to make is
whether to rent a home or buy one. Both renting and buying have their pros and
cons. The final decision depends on what is more suitable for us. Someone likes
to have the freedom of owning a home but is also not afraid of the
responsibility that comes with it. On the other hand, some people prefer to
live in a home and have a certain level of freedom, but no responsibility,
except for paying the rent and the bills. Keep reading to learn more about the
pros and cons of purchasing and renting a home.
We'll start by sharing the advantages and disadvantages of
buying a home and then move on to the positive and negative sides of renting.
You should consider everything carefully before making a final decision.
Buying a home: Advantages
Good long-term investment
Investing in real estate is always a good decision. It is an investment that pays off the most. Property prices can drop over time, but that rarely happens. If you invest in a property, you can expect its value to grow over time.
Building equity
Another advantage of buying a home is building equity. Equity is the amount between the price you can get for your home and what you owe. As you pay the mortgage, the equity grows. That happens because more of what you pay monthly goes to the loan balance rather than the interest, increasing the equity.
Stable monthly payments
What's more, when buying a home, you can go for a fixed mortgage rate, meaning you will pay the same amount every month until you pay it off completely. On the other hand, rent usually increases at every lease end.
Buying a home: Disadvantages
High upfront costs
As far as the disadvantages of buying a home are concerned, the first one is high upfront costs. Besides the mortgage rate you pay every month, additional costs and fees are associated with buying a home. For instance, there are closing costs on the mortgage, which range from 2 to 5% of the total home price, many fees, mortgage insurance, property taxes, first-year homeowner's insurance premium, and home inspection, to name a few. It takes around 5 years to recover from these costs.
Less mobility
When you invest in a home, you are not likely to move so easily to another town, in case you get a job opportunity. You are more tied to the area where you bought a home.
Maintenance costs
Moreover, owning a home comes with additional responsibilities. You are responsible for all the repairs as well as maintenance of your home. There are always things that get broken and require repairs and things you need to change and refresh.
Renting a home: Advantages
Flexibility
When it comes to renting a home, there are several advantages. The first one is flexibility. You can choose the home you like, in the area you like, and stay there however long fits you. You can quickly move to another town if a better job opportunity arises.
No upfront costs
The second significant advantage is no upfront costs, except for the deposit, which you get back at the end of the lease if you respect all the items from the lease contract. If you are looking for a home in Sydney, you can hire a buyer's agent in Sydney to find you a home suitable for your needs.
Repairs are not your responsibility.
Also, whatever repairs are needed, they are not your responsibility, so it is one thing you don't have to think about. The homeowner is responsible for dealing with these things in the shortest period possible.
Renting a home: Disadvantages
Not building value
Certain disadvantages come with renting a home. One is not building any value, as you need to invest in something permanent. The homeowner's equity grows and not yours.
You can't make any permanent changes
Homeowners often protect their property by outlining things they are not allowed to do in the contract. These things often include making any changes to the property whatsoever, even painting it the same colour. So, you have to accept to live in a property the way it is.
No credit score improvement
Also, when it comes to your credit score improvement, you
have yet to do so. You only have it when you buy a property. Paying a mortgage
on time improves your credit score, you don't get the same advantage from
paying rent.
Carefully consider all the facts before you decide to buy or
rent.
