Ahh. The age old question. Do I keep renting or do I bite the bullet and actually buy a house? It’s a big decision, and not one that should be taken lightly. Let’s talk about the pros and cons of renting vs. buying, so that you are well informed to make a decision.
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Renting
Pros
- Easy to get into a rental– you just need first month’s rent, a security deposit, and a credit check.
- No maintenance – the landlord is responsible for the house & usually snow removal/yard.
- You’re not tied down. If you aren’t sure where you want to be – what city, what state, etc. you can move around as much as you want.
- Utilities are sometimes included.
- Save up towards a down payment for a house
Cons
- No pets. It can be very hard to find rentals that accept animals, for fear of you precious pup or kitty ruining the house.
- You can’t change anything. Some renters let you paint, if agreed upon first. But, the house itself is staying the way it is. You can’t make any permanent changes to it.
- No stability. Leases are commonly for just one year. After that year, you may be able to renew, or maybe not. That means it’s possible that every year you will be packing back up and finding a new place. That’s definitely something to consider in renting vs. buying.
- The owner can sell. In addition to no stability, the owner can up and decide to sell the house – with you in it! The next owner may not want a tenant, so you will be out when your lease is up. You will also need to accommodate showings for the property.
- It can still be a lot of $ down. Say you are looking for a rental that is $2500 a month. You will need to come up with a month’s rent and a security deposit, which is usually 1.5 months. If you are using a Realtor, their fee is one month’s rent. So you will need $6,250 just to get into that rental. That’s a nice chunk towards a down payment…
- You are paying someone else’s mortgage. The landlord owns this house, and you pay their mortgage – plus some. Why not just pay your own mortgage?! If your rent is $2500 a month, after 1 year, you have now payed that owner a whopping $30,000!! And once your lease is up, you still have no where to go.
Buying
Pros
- Investment. Buying a house is an investment. Your money will go towards your mortgage each month, and you will actually have something to show for it. You will start to have equity in your house. You could decide to one day sell and MAKE money off of your house. Or, one day you will pay off your house – and that will feel absolutely amazing.
- Make your house your own. If you own a house, you can do whatever you want to it! Paint crazy colors if you’d like. Do an addition. Add an in-ground pool. Tear down a wall. Have 3 dogs and 2 cats. It’s your house!
- Stability. There’s no lease to worry about. You’re not getting kicked out. Every year, you will be living in your house, not packing up and looking again. As long as you pay your mortgage every month, you will have a place to live and enjoy for as long as you’d like.
- Get what you want. Many times, rentals are few and far between – and go super quick! You kind of have to jump at one when you need one, and be able to accommodate to what it is. We lived in a 2 family house once. Not something I would ever do again. Eventually we bought a great house with a great yard. We were able to look for what we wanted, and there were plenty of options to purchase.
- Space. When you own your house, you own your space. Some rentals have off limit areas. Use of the yard, the garage, the shed, the basement, etc. can all be restricted. When you own, you get every inch of that property to do whatever you’d like!
- Financing. There are so many different kinds of loans these days, it’s worth looking into. You could get a rehab loan to fix up a house, a VA loan if you are a Veteran, an FHA loan if you don’t have a big down payment, etc. Even with a conventional loan, now there are ways of putting less down, paying down points for mortgage insurance, etc.
Cons
- It’s expensive. Yes, it sure can be. This is a big reason people consider renting vs. buying. To get what you want, you’re going to need a decent down payment, be able to afford your monthly mortgage amount, plus all the utilities. Oh, and if something breaks, there’s no landlord to call – it’s all on you! You may need a new heating system one day, or a new roof. And you need to pay for it.
- Taxes. Taxes are such a pain. Here in NJ, our taxes are very high. Taxes are a yearly occurrence too – they aren’t going away. If your taxes are $15,000 a year, you are paying that every year. If anything, your taxes will only go up as you make improvements on your house…they won’t be going down.
- You’re stuck in 1 place. You can’t just up and go travel the world – you have real responsibilities now. And if your new neighbor is a nightmare, they aren’t going anywhere either. Maybe you moved to the middle of no where and are now regretting it. You need to be really sure that you will be happy in this one place for a long time.
- Foreclosure. Yes. I said the F word. Foreclosure is when you stop paying your mortgage and your bank wants to take back the property. If this happens and you cannot pay what you owe to the bank, they will take your house. You will have nothing to show for what you have put into it, and your credit will be destroyed. Just make sure you purchase house that you can afford.
Now that you know the pros and cons of renting vs. buying, you have some thinking to do! Wanting to buy but aren’t sure if you can afford it? Speak with a mortgage lender and get a better idea – you may be closer than you think. Plus, check out buying a house – a 10 step guide and see what the whole process actually entails.
