According to recent reports, 20% of millennials believe they’re destined to rent forever. The highest reasons for this belief include a troubled housing market and cost. However, many financial experts believe that buying a home is a great investment. So is it worth it for people to scrounge and put themselves into debt for a home? Or is a lifetime of renting what’s best? Below, we’ll explore the pros and cons of renting vs owning a home, so make sure to keep reading!
1. Monthly Expenses
The average mortgage sits at around $1,029 according to Lending Tree. Note, however, that this doesn’t include extras like utilities or repairs. If you’re a first-time homeowner, however, you can expect to pay around $1,235.
Meanwhile, the average cost of rent for a one-bedroom apartment sits at $1,120.
From a simple financial standpoint, it’s often as affordable — if not most cost-effective — to pay a monthly mortgage. Plus, you may even qualify for the Home Mortgage Interest Deduction (HMID). It would be wise to consult a professional before you claim this deduction on your tax return.
It’s worth noting, though, that this doesn’t account for access to loans, which remains the biggest barrier for millennials
There is one major financial incentive to owning vs renting, and that’s wealth creation. Owning property and paying that mortgage each month allows the accumulation of equity.
In essence, you’re consistently one step closer to owning your home with each payment, thus also increasing your net worth.
This is perhaps the biggest benefit of renting vs owning a house, as all of your costs come bundled into rent. As such, you aren’t responsible for upkeep.
Take roofing, for example. While most companies can help you save a ton on a new roof, it’s still an expensive endeavor.
If you own a home, that cost is all on you. But if you’re renting, the landlord is responsible for the upkeep, which in turn can save you quite a bit of money.
Note that the specifics of maintenance while renting will vary from lease to lease. Some landlords expect tenants to keep up with their own lawns, for instance, while most will outsource the task to a landscaping company.
Yet another drawback of owning vs renting a house is the property tax homeowners are responsible for.
As if tax time wasn’t stressful enough as it is, property taxes can add quite a bit to your annual expenses. Therefore, this is one area where renting takes the cake again.
Renters don’t have to pay any additional taxes on a home. It’s all on the property owner.
5. HOAs and Management Companies
While homeowner’s associations seem like a good idea in theory, they can cause quite a bit of frustration. Not to mention, their fees can drive up the cost of your mortgage payments.
Meanwhile, renters won’t have to deal with the hubbub put forth by their local HOA. At worst, they may have to interact with a management company.
Therefore, we’re chalking this one up to another point in favor of renting.
Renting vs Owning a Home: Who Wins?
Ultimately, there’s no real victor in the battle between renting vs owning a home. It all depends on how much you can afford to pay each month and how much work you’re willing to do to keep your house looking good.
Be sure to carefully consider your options before making your final choice.
For more tips on making your house a home, be sure to check back with our blog!