To rent a house or to buy oneāis the decision tearing you apart?
When it comes to having a roof on our head, weāre 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 āshould I rent or buy a houseā is that one should buy, but thatās 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 oneās own ego.
We all want to own the house of our dreams. Itās 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 you would have to bear the costs, while the tenant you wouldnāt have to worry about it.
This is just a small example, for deciding whether one should rent or buy a house isnāt just restricted to ego issues. Real kickers are factors like your finances, long term financial goals, real estate marketābasically, 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 building no equity on it?
While the āShould I rent or buy a houseā debate rages on, letās look at some concrete bullet points to find out who winsāTeam 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, weāll not incur any costs. Or tenants believe that all they have to do pay the rent and thatād be that.
In both of these cases, thereās more than what meets the eye. Letās look at costs involving renting a house and buying it. Theyād be critical in calculating your house costs from a birdās eye view.
Inspecting a house thoroughly takes time, but is well worth the cost even when youāre 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 isnāt harm in buying a house. But if I canāt sign myself up to a commitment of that sort, I should stick to being a tenant till Iām stable on my feet.
This factor is very much dependant on my personal commitments. If Iām a bachelor or Iām living together with my S.O., Iād prefer renting a condo which I can switch here and now. But as a family man, I would seek a sense of security; hence Iāll 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 Iād change and what Iād not, then itās about time I start gathering money to buy a house. If Iām flexible enough to manage this problem, then renting in might be wise. If I wish to impose my āDream Houseā blueprint wherever I go, I should think about buying a house.
This oneās simpleāif I consider maintenance and repairs too big of an expense, I should definitely rent in. However, if Iām completely okay in dealing with these expenses, then Iād 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 Iāve planned well. But if thereās even a slightest of cloud on the judgment, I have to figure my stuff out before deciding whether should I rent or buy a house.
If Iām able to religiously comprehend right answers to these questions, then it wonāt be a biggie for me to decide whether should I rent or buy a house. Letās look at the pros and cons of buying a house and renting it for better clarity.
|Ā· Build equity and credit by paying the mortgage||Ā· Get ready to dive into loads of paperwork with a sizable amount of money in hand|
|Ā· Drop the tenant-landlord jitters as youāre not answerable to anyone||Ā· You could lose your money if the value plummets.|
|Ā· Live a stable lifeāesp. with kids||Ā· Your expenses donāt stop at mortgage payments|
|Ā· There are possible tax benefits & property tax bills to take advantage of||Ā· House prices are on the rise every passing day|
|Ā· Give your home the dream makeover by tweaking it to your fancies||Ā· Do all the makeover you want, but youāll be responsible for repairs and remodeling|
|Ā· Initial costs & paperwork are close to nothing as compared to buying a house||Ā· Property belongs to the landlord; s/he can rent or sell the property anytime|
|Ā· Feel free to switch houses as and when you want||Ā· There arenāt a lot of choices for places to rent, and the tenant application might get rejected|
|Ā· Youāre not responsible for maintenance, but donāt forget to be responsible enough!||Ā· Youāll find yourself on the move every now and then|
|Ā· Even if the house value declines, itās not your headache||Ā· Paying rent wonāt build your equity in any form|
|Ā· You can build your credit if your landlord reports rent payments to credit bureaus.||Ā· 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 first three to four years, after which mortgage payments are a less bitter pill to swallow.
If you and your kin have āthe dream houseā in 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 canāt keep up with the payments (and you donāt have a backup), then stay in a rented condo for heavenās sake.
Owning a house isnāt the only expense you have in lifeāthereās 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 itās like to reach the maximum level of being an adult by owning a house. Itās time for me to look around and decideāwhether I should rent or buy a house? May the best choice win!