Choosing whether to rent or buy your next home is a major decision and ultimately comes down to what is right for you and your family’s lifestyle and needs, as well as your financial health. It’s not unusual to bounce back and forth between the two when making this decision because both have pros and cons worth noting.
To help you organize those pros and cons, we’ve created a list of the advantages and disadvantages of renting and owning a home to help you understand what both have to offer.
RENTING A HOME
- No maintenance costs: When renting your home, your landlord oversees any maintenance, repairs or issues that may arise. When there is a problem, your landlord is a call away to fix these issues, unlike a homeowner, who is fully responsible for the maintenance of their home and the associated costs.
- No down payment: The cost up front for renting a home is significantly less than owning, which includes things like a down payment and closing costs. Although most rental agreements ask for the first or last month’s rent as a deposit, the payout for homeowners is much higher. Renting allows for a quick and easy transition into a new home.
- Easier to move: With month-to-month rental agreements, if a renter needs to move quickly due to a lifestyle or work change, they can give their notice and move out easier than a homeowner. Lifestyle preferences and whether you hope to be permanent in the location you’re in is something to consider when renting a home.
- Unexpected rent increases: Although you pay a set amount of rent on a home and how much your landlord can raise it during your tenancy is regulated, rents in general between tenancies can rise sharply. Being financially prepared for these increases — or even for incremental yearly increases — can be an issue for some renters, making it hard to consider renting.
- Unable to build equity: One of the biggest issues that people have with renting a home is not being able to build any equity. The monthly rent payments you make are not being invested into you, they are benefiting your landlord.
- Landlord is in control: Your landlord will be in complete control of the rules and regulations of the home and whether renovation changes can be made. To make changes to your home, you must consult with your landlord to see if what you hope to change is something they are willing to agree upon. This can make your home feel less personal and can make renters feel a disconnect towards their own living space.
BUYING A HOME
- Investment: Buying a home means that you are investing in a property that, in the future, should become more valuable if you want to sell. Compared to renting and making payments to your landlord or a rental property company, you are making payments into an asset for yourself and your family.
- Ability to renovate: You own the right to do any renovations or maintenance to your home without needing to check in with a landlord when you purchase your property. The freedom to redecorate and renovate your home can help increase its value with each change you make, which helps with the future of your home if you wish to sell.
- Control of the home: With owning your home, you have full control of the property. You oversee the rules of your home, what changes can be made, and any maintenance work that needs to be completed. Being your own landlord allows for more freedom and privacy and let’s you personalize your home exactly the way you want.
- Longer commitment: When you rent your home, you can put in your notice and leave whenever you want. Homeowners, though, are tied to their homes and must go through the process of hiring a Realtor, putting their home on the market, and waiting until they receive and accept an offer. If you have a lifestyle or work position that involves quick moves, settling in one location may be difficult to do.
- Unexpected costs: Maintenance costs, regular upkeep and repairs can pop up unexpectedly when you own your home, so being prepared for this is important. Setting aside money regularly for any emergency repairs that may arise can be difficult and is one important consideration when purchasing a home.
- Regular fees: Fees such as property taxes, utility costs, homeowner’s insurance and mortgage payments are just some of the regular fees that go into homeowning. Check with your financial adviser to ensure purchasing a home is within your budget and your financial health can accommodate the expense of owning a home.