Sooner or later, you’ll be faced with the question of if (and when) you should make the move from renting a house to buying. If you’re staying in an area where renting is more cost-effective than buying, or if you aren’t sure how long you’ll want to stay in your next home, you already have obvious and important reasons to put off buying. But other than that, what are the upsides (and downsides) to each?
Why to rent:
Maintenance: Once you’ve reported problems to the landlord, you’re generally not responsible for making sure anything gets fixed or for dealing with any contractors. You might not even need to schedule repairs for when you’re home. Though you don’t have as much control if your landlord is ignoring your requests, in general this is much easier. You’re also not responsible for the building exterior and yard the way you would be as an owner.
Less cash on hand needed: Especially in the credit environment now, buying a house can take a substantial down payment. A security deposit along with (typically) first and last months’ rent is often easier to come up with.
Credit restoration: Though bad credit might make finding a nice rental tough, it makes getting a decent home loan even harder. If your credit is weak you’ll likely find it easier to find a rental you like than a purchase, and building a history as a responsible renter is a good way to improve your score for the future.
Amenities: Some utilities may be included in your rent, meaning you won’t have to worry about paying separate bills. Besides that, considering rental complexes can make it easier to find homes with access to pools, gyms, and other special features.
Why to buy:
Building equity: As you pay down your mortgage, you’ll be able to use increasing amounts of equity to get new loans. Equity is the difference between the market value and the amount you still owe, which can be used as collateral.
Less money over time: If you’re planning to stay in your new home for many years or even decades, the amount you pay on your mortgage can average out to a lower amount than rent on a comparable home.
Control: Most importantly to many people, you’re free to carry out remodelling projects that generally wouldn’t be allowed in a rental, all the way down to painting the walls. You won’t be answerable to a landlord when it’s time to move out. It’s also often easier to be able to hire builders and maintenance workers and get things taken care of yourself, without having to wait for your landlord and using the workers they choose.
The financial aspects of both renting and buying can get complicated and will be specific to your individual situation. But don’t forget to think about which will work better for your lifestyle.