Rent vs. Buy – Things to Consider There are pros and cons for both renting and buying and the right fit is going to be based on your personal and financial situation and preference. With this in mind, let’s take a look at some of the advantages and disadvantages of both renting and buying.
Renting is great in Certain Situations
Renting is great if you don’t have plans of settling. If you are going to live somewhere for a year or two or on a temporary basis, renting may be in your best interest because you more than likely will not be able to build equity in such a short time frame. Renting requires no substantial investment or long term commitment. However, keep in mind that any money you spend on renting a property will not receive even the tiniest of returns.
Buying – A Better Option for Permanent Living
Do you want to pay someone else’s mortgage or would you rather pay your own mortgage? Most people would rather pay their own mortgage. If you are settled in a location where you see yourself living for the next five to seven years, buying may be the best option. Essentially, paying a mortgage is like a forced savings plan; except your savings is not cash, it is equity in your home. Sure, the investment is significant and it is likely the largest purchase you will ever make, but you are paying your own mortgage rather than paying your landlord’s mortgage. If you hold onto your property long enough, you will build equity in your home which in turn makes your home an asset. Your home is an asset you can trade for other assets. You can sell your home and get cash for your equity. If you buy another home, you can use that money (equity) to purchase a new house, which allows you to borrow less. If you ever need cash, you can borrow money against the equity in your home. Additionally, homeowners who accumulate substantial equity in their homes are able to use it as a retirement safety cushion.
Buying also protects individuals and families from rising rents. A fixed rate mortgage keeps your monthly payment constant versus rental rates that can be raised at the end of your lease agreement by your landlord. Owning a home also affords you the opportunity to become a landlord yourself. You always have the option of renting out your property for additional monthly income. There are so many advantages to owning a property versus renting a property, many of which I was unable to highlight. Feel free to contact me with any additional questions! If you would like more information on the pros and cons of renting and buying contact Ashley Novak at 424.333.5340 or ashley(at)ashleynovakre(dotted)com.