To rent a house or to buy one‚ÄĒis the decision tearing you apart?
When it comes to having a roof on our heads, we‚Äôre left with two choices. Either we can rent a house or we can buy it to make it our own. The common answer to the question ‚Äúshould I rent or buy a house‚ÄĚ is that one should buy, but that‚Äôs not entirely true.
Renting a house has its own share of positives and buying a house, paying the mortgage to make it your own after 20-something years has its own plus points. After all, this problem is very much deep-rooted with one‚Äôs own ego.
We all want to own the house of our dreams. It‚Äôs something that our parents and their parents have dreamt of (ah, the concept of owning a piece of land on earth sounds so empowering) and we strive for the same.
But compared to monthly mortgage, home-equity shenanigans, and of course, ownership costs, it feels like paying rent for a house is better. For instance, if a pipe breaks down, the homeowner would have to bear the costs, while the tenant wouldn‚Äôt have to worry about it.
This is just a small example, for deciding whether one should rent or buy a house isn‚Äôt just restricted to ego issues. Real kickers are factors like your finances, long-term financial goals, real estate market‚ÄĒbasically, money.
Our point is that there are some people who believe that buying a house is better because you get the ownership along with it. On the other hand renting is efficient, but is it really wise to pay money to someone and build no equity on it?
While the ‚ÄúShould I rent or buy a house‚ÄĚ debate rages on, let‚Äôs look at some concrete bullet points to find out who wins‚ÄĒTeam Rent or Team Buy?
First things first, you have to understand the costs involved in renting a house and buying it. We often believe that (after 20+ years of) paying the mortgage for a house we own, we‚Äôll not incur any costs. Or tenants believe that all they have to do is pay the rent and that‚Äôd be that.
In both of these cases, there‚Äôs more than what meets the eye. Let‚Äôs look at costs involving renting a house and buying it. They‚Äôd be critical in calculating your house costs from a bird‚Äôs eye view.
Inspecting a house thoroughly takes time, but is well worth the cost even when you‚Äôre renting it.
No matter how much you weigh in the options of renting or buying a house, you have to ask yourself some key questions. Answers to these questions will pretty much decide what the best decision for you is:
How do I decide whether I should rent or buy a house? I have to peep into my wallet. If my stream of income gives me the luxury to pay off the mortgage for some years, then there isn‚Äôt harm in buying a house. But if I can‚Äôt sign myself up to a commitment of that sort, I should stick to being a tenant till I‚Äôm stable on my feet.
This factor is very much dependant on my personal commitments. If I‚Äôm a bachelor or I‚Äôm living together with my S.O., I‚Äôd prefer renting a condo which I can switch here and now. But as a family man, I would seek a sense of security; hence I‚Äôll opt for a stable place to crash for a long time.
If I walk into a house up for rent and I start identifying what I‚Äôd change and what I‚Äôd not, then it‚Äôs about time I start gathering money to buy a house. If I‚Äôm flexible enough to manage this problem, then renting in might be wise. If I wish to impose my ‚ÄúDream House‚ÄĚ blueprint wherever I go, I should think about buying a house.
This one‚Äôs simple‚ÄĒif I consider maintenance and repairs too big of an expense, I should definitely rent in. However, if I‚Äôm completely okay in dealing with these expenses, then I‚Äôd take real good care of my house.
Am I at a place in life where I can afford to lock down a considerate portion of my income towards mortgage payments, let alone maintenance of living in my own house? If yes, then I‚Äôve planned well. But if there‚Äôs even the slightest of cloud on the judgment, I have to figure my stuff out before deciding whether should I rent or buy a house.
If I‚Äôm able to religiously comprehend the right answers to these questions, then it won‚Äôt be a biggie for me to decide whether should I rent or buy a house. Let‚Äôs look at the pros and cons of buying a house and renting it for better clarity.
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† Build equity and credit by paying the mortgage||¬∑¬†¬†¬†¬†¬†¬†¬†¬† Get ready to dive into loads of paperwork with a sizable amount of money in hand|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† Drop the tenant-landlord jitters as you‚Äôre not answerable to anyone||¬∑¬†¬†¬†¬†¬†¬†¬†¬† You could lose your money if the value plummets.|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† Live a stable life‚ÄĒesp. with kids||¬∑¬†¬†¬†¬†¬†¬†¬†¬† Your expenses don‚Äôt stop at mortgage payments|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† There are possible tax benefits & property tax bills to take advantage of||¬∑¬†¬†¬†¬†¬†¬†¬†¬† House prices are on the rise every passing day|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† Give your home the dream makeover by tweaking it to your fancies||¬∑¬†¬†¬†¬†¬†¬†¬†¬† Do all the makeover you want, but you‚Äôll be responsible for repairs and remodeling|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† Initial costs & paperwork are close to nothing as compared to buying a house||¬∑¬†¬†¬†¬†¬†¬†¬†¬† Property belongs to the landlord; s/he can rent or sell the property anytime|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† Feel free to switch houses as and when you want||¬∑¬†¬†¬†¬†¬†¬†¬†¬† There aren‚Äôt a lot of choices for places to rent, and the tenant application might get rejected|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† You‚Äôre not responsible for maintenance, but don‚Äôt forget to be responsible enough!||¬∑¬†¬†¬†¬†¬†¬†¬†¬† You‚Äôll find yourself on the move every now and then|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† Even if the house value declines, it‚Äôs not your headache||¬∑¬†¬†¬†¬†¬†¬†¬†¬† Paying rent won‚Äôt build your equity in any form|
|¬∑¬†¬†¬†¬†¬†¬†¬†¬† You can build your credit if your landlord reports rent payments to credit bureaus.||¬∑¬†¬†¬†¬†¬†¬†¬†¬† There are no tax benefits|
If you are wondering which one comes out to be more economical when you weigh on scales, then a study from NerdWallet says that buying a house is economical. Well, at least for the first three to four years, after which mortgage payments are a less bitter pill to swallow.
If you and your kin have ‚Äėthe dream house‚Äô on your bucket list, then you should gather all your money, switch to better-paying jobs, scale high up the ladder, and rake in the money to own it. If you can‚Äôt keep up with the payments (and you don‚Äôt have a backup), then stay in a rented condo for heaven‚Äôs sake.
Owning a house isn‚Äôt the only expense you have in life‚ÄĒthere‚Äôs debt, bills, Starbucks Latte, NetFlix, and binge-eating too. If it were me, I would consider all these factors before deciding whether I should rent or buy a house.
Now you know what it‚Äôs like to reach the maximum level of being an adult by owning a house. It‚Äôs time for me to look around and decide‚ÄĒwhether I should rent or buy a house? May the best choice win!