A home is more than just a roof over your head. It can also be an investment in your future if you’re planning to buy. Yet there are many things to consider when you’re deciding whether to rent or buy. After all, when you buy a home, you build equity, but some renters are willing to forego the potential financial gain so they won’t have the responsibility of homeownership.
Ultimately, the decision of whether to rent or buy comes down to your unique financial situation, plans, and goals. So, which is the better option for you?
Benefits of Renting a House
Renting can make sense for certain people. For one, it is typically more affordable than buying a home. When you rent, you don’t have to worry about mortgage payments, insurance or property taxes. You also don’t have to worry about making repairs or maintaining the property. As a tenant, you can contact the landlord about anything that goes wrong, and it’s their responsibility to fix it, not yours.
Opting to rent instead of owning can also make sense for someone who travels frequently or doesn’t plan to stay in the same city for long. However, these individuals could also consider investing in a home and renting it out when they’re gone for extended periods.
Drawbacks of Renting a Home
There are some drawbacks to renting. For example, you don’t build any equity when you rent. This means you may be missing out on an opportunity to invest in your future. Additionally, renting typically means you have less freedom to change the property. For instance, you might be unable to paint the walls or make other modifications you would if the space were truly yours.
Benefits of Buying a House
Overall, buying a home is usually the better option. Yes, it is a larger financial investment than renting. However, you’re building equity when you purchase a home. This can be helpful if you ever need to borrow money or sell the property in the future. Plus, if you lock in a low-cost fixed-rate mortgage, you won’t have to worry about the rent increases you may have experienced as a renter.
Another incentive to buy a house is the tax benefits. If you itemize deductions on your taxes, meaning you track individual deductible expenses instead of taking the more common standard deduction, you can deduct mortgage interest and property taxes. Of course, you’ll only be able to write off interest up to the mortgage interest deduction limit. However, depending on the size of your mortgage and your interest rate, your tax savings could be significant.
Of course, there are also intangible benefits to owning a home. When you own a home, you have the freedom to make it exactly what you want. You can paint the walls, renovate the kitchen, and landscape the yard exactly to your liking. And you don’t have to worry about a landlord changing the rules or increasing the rent.
Things To Consider When Buying a Home
Along with the opportunity to make your home whatever you want it to be, you’ll also be responsible for renovations or repairs to get it there. Over time, you’ll also need to perform regular and potentially costly maintenance, like replacing a roof, siding or fencing or getting new appliances or HVAC units. Yet, if you properly budget and plan for these expenses in advance, they won’t sneak up and put you into a bad financial situation.
The Bottom Line
In the end, buying a house is almost always a better financial decision than renting. You have more control over your living situation, can build home equity, and may be able to deduct mortgage interest from your taxes. There are some things to consider when buying a home — like being responsible for costly repairs — but they’re generally outweighed by the benefits.
Source: iQuanti, Inc.
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