Home ownership has always been considered as the cornerstone of the American Dream. Lately however, due to the ongoing housing crisis, renting instead of buying has been on the rise. Some pundits are saying that the benefits of home ownership are declining and renting as opposed to owning is the trend of the future. People on the other side of this issue are strongly disagreeing with such statements. Regardless of which way the debate goes, let’s look at the pros and cons of both renting and buying a house.
Pros of Buying
- You have the pride of home ownership
- You have achieved a part of the American Dream
- You may benefit from tax deductions that come with home ownership
- In the long run and under normal circumstances, you may benefit financially
- You have full freedom to paint, remodel, drill, nail, and decorate your home as per your wishes
- You won’t feel guilty about helping your landlord payoff his/her mortgage and enjoy the benefits at your expense
- You can have pets
- You’ll eventually be able to pay off your mortgage and become debt free
- It gives you satisfaction that your kids can inherit your property.
Cons of Buying
- You will be shelling out a lot of your savings for the down payment
- When you add property taxes, escrow and PMI (if you haven’t put 10 percent down) to your monthly mortgage payment, you’ll end up spending more than renting
- You will be responsible for landscaping costs, home owners’ association fees and general upkeep expenses
- Homeowner insurance is significantly higher than Renter’s insurance
- Your appliances will eventually breakdown, requiring you to pay for repairs or replacements
- In recessionary periods, you have the risk of significantly losing the value of your home
- You may not be able to move easily or quickly to pursue better employment opportunities
- You may incur additional expenses of managing and maintaining your property if you rent your house due to a forced relocation
- The money you have spent on remodeling cannot be recouped if your house is in a down market.
Pros of Renting
- Renting offers quick mobility and liquidity, but you lose quite a bit of freedom and you may have to make some compromises with your preferred quality of life
- You really like the area but it is very difficult or expensive to buy a house there
- If your rent is lower than the prevailing mortgage payments in the area, you’ll have more money for other things
- If you have newly relocated to a town, renting for six months to a year may be a better option for you till you figure out where you want to live
- Perhaps your personal financial situation is not healthy enough to buy a house at this time
- May be your job requires you to stay in a city for a relatively short period of time and relocate to a different part of the country or world at a short notice
- You may be in an area that has taken a severe beating during the recent real estate crisis, and the prices are still unstable
- Your job situation may be shaky and even though you can afford to buy a home now, you have the freedom and peace of mind of being able to relocate quickly if need be
- You are unsure how long you will live in the area, and it may also be very difficult to sell in that area
- You don’t have to worry about your home losing its value drastically, leaving you with an upside down mortgage – where you owe more than the value of the house.
Cons of Renting
- You are not building equity or assets when you rent
- Your rent may sharply increase after your lease period ends if you are living in a high demand area
- You like the house you are renting. But it has carpet, whereas you prefer hardwood
- You desire to own a pet. But the landlord of the home you are renting has a no-pet policy
- You prefer gas-based cooking, but the house you are renting has an electric stove
- You like hanging lots of family pictures and paintings, but the home owner may restrict nailing walls
- You have a problem with an appliance, but your landlord is not very responsive
- You will not be able to cut a hole in a wall to conceal your home theater speakers
- You emotionally resent the idea of helping your landlord become debt free instead of yourself
- The owner of the home you are renting may become delinquent on the payments and the house may be foreclosed, causing you to lose your security deposit and your roof.
