Welcome to part 2 as we are asking the question:
Should you buy or rent your home?
In part 1, we covered the usual home buying story.
We also covered what do to when the answer is obvious and some of what to do when the answer is not obvious.
Let’s dive deeper into what to do when the answer is not obvious.
We are going a little further into the actual pros and cons of each side and taking a closer look at the buying vs. renting debate.
Let’s see what makes the most sense for you…
Buying Vs. Renting Compared
The Pros of Buying
- You will eventually stop making payments.
- You will keep the same monthly payment on a fixed loan.
- You can remodel, add-on, customize, paint, etc.
- You [eventually] actually own your home.
- You could gain equity if the house appreciates.
- You can have pets without deposits or permission.
- You can use mortgage interest as a tax deduction.
The Pros of Renting
- You usually have a lower upfront cost.
- You can change locations fairly easily.
- You don’t have to worry about maintenance.
- You don’t have the debt of a mortgage.
The Cons of Buying
- You’re taking on a substantial amount of debt with a mortgage.
- You’re responsible for maintenance and making repairs.
- You’re not easily able to pack up and move when you want.
- You’re responsbile for closing costs and a down payment.
- Your credit can be negatively impacted if you can’t pay your loan.
The Cons of Renting
- Your rent price can increase, sometimes without notice.
- You’re not building equity, you are simply spending rent money.
- You’re not eligible for tax deductions and incentives.
- You’re not usually allowed to customize the house.
- You’re typically struck with extra fees if you have pets.
- You’re never 100% financially free if you are paying rent.
Every situation is different and unique. Sometimes there is only one obvious choice. Other times, it may be more difficult to decide.
Both Sides of the Argument
Many will argue that you should find cheap rent, then invest the money you would have put into buying a home. That’s not a bad idea.
They will say that a mortgage is simply renting money from a bank. That’s basically true.
Others will argue that you should buy, because renting is throwing your money away. There is truth in that as well.
Both options make sense for different reasons, so you have to figure out what makes sense for you.
More Than One Reason to Buy a House
This article is debating between buying and renting for your personal home.
Owning rental property is a different story.
Rental property is an investment and [hopefully] creates cashflow.
If you finance rental property, it’s important to have the right financing and the right house, but there is no argument that rental property is an investment.
In fact, rental property is usually what people are referring to when they talk about investing in real estate.
It All Comes Down to This
Ultimately, you have to run the numbers and calculate the cost.
Things like taxes, insurance, maintenance, deposits, down payments and other variables should all be included in your calculation.
Figure out what is right for you.
There are literally thousands of articles all over the internet that are trying to convince you one option is better than the other.
The problem with those articles is that nobody knows your specific situation.
It’s really as simple as weighing your own personal pros and cons. You should never make a large purchase or investment without going over these 6 steps…
- Sleep on it.
- Talk it over with your spouse.
- Fully inspect what you’re buying.
- Make sure you can still sleep at night after buying it.
- Pray about it (or whatever it is you do).
- Count all costs.
Finally, this entire article and this entire debate is really between renting and having a mortgage.
Paying cash for a home saves you all of the interest. As long as you can get a good deal, it’s a great idea to buy a home, in full, with cash.
Sure, some people say that there are better ways to invest that money, but if you do the research and the work, you will be making a fine investment.
Don’t forget to check out part 1 of this series if you missed it.
Photo credit: Anna Leavitt, Tambako The Jaguar, Great Beyond, Mylla Ghdv
SUBSCRIBE FOR MORE! HERE'S WHY:
1. You get 7 free books
2. You get the best money & productivity articles
3. You get the latest updates - all in one email per week