There is a passionate debate in the community to either rent or buy a house. The arguments presented by both sides stand valid and cannot be discounted blindly. The dispute continues to evolve with changes in tax legislation and socio-economic climate. There are clear substantial differences between the two and requires a thorough understanding of both scenarios.
There is a lot to deliberate before jumping to a conclusion. In this article, let us unpack the pros and cons of buying a house versus renting one. Navigate accordingly to which of the following arguments speak closer to your logic and circumstance:
Long-Term Equity vs Maintenance Expenditures
Equity is calculated by subtracting how much you owe on your mortgage from the market price of your property. It is the accumulated value of how much you can gain by selling the house and after repaying the remainder of the mortgage. Additionally, the equity increases when property value rises, and it will rise gradually every year as statistics predict. The fact that some properties do lose value, but those instances are far more uncommon in comparison. The land on which your house sits is an asset and offers a generous rate of return.
On the other hand, owning a house comes with the expenses for maintenance and repairs. You are the first line of repair whenever an issue arises in your home. However, complex complications require professional attention that will mean a higher upfront cost. If you are one of the lucky homeowners with insurance to defray some of the costs, you would remain responsible for getting those repairs done.
Stability vs Flexibility
The sense of stability is real when you have a place that is all yours. Unless the unfortunate fact of mortgage default, no one can take this property from you. It brings a sense of community and belongingness, which can be translated as a point of pride as well. You will also enjoy the ease of planning long-term and how your life will shape in the same residence for years to come. However, renting can cause insecurity as you might be asked to relocate if your landlord decides to sell the place.
Nonetheless, rental leases provide a short-term commitment and ensure a level of flexibility. For example, a job opportunity in a new city would look more viable when you can easily break the lease. Relocating when you owe a house can cause liquidity issues and might keep you tied down. There is a degree of freedom you can enjoy as all obligations cannot exceed the length of the lease.
Income Avenues vs No Additional Costs
The exclusive perk of owning a property is the opportunity to earn extra income by renting out a specific space or a room. Many homeowners opt for long-term tenants by sacrificing their basement or a detached room. In this age of technology, there are new opportunities to earn additional cash by listing a spare room on Airbnb. You can explore various owning options and discover where to buy investment property.
Nonetheless, renting a space does have its perks and maybe the most attractive one is that you are not required to pay any additional fees or bills. A homeowner faces down payments, closing costs, taxes, and interest payments. These payments cannot be recovered later and do not help build equity.