You probably have some friends or family members who are home renters, and some who are homeowners. And you’ve probably heard all of them tell you why renting your home – or owning it – is the way to go. But determining whether you should rent or buy a home is a very personal decision, with a lot of different factors to consider. And there may not always be one right answer. This article from TIME offers some suggestions that might help you come to a decision that’s right for you.
Today in the U.S., buying a home is 35% cheaper than renting, according to Trulia.com. With 30-year mortgage rates available below 4%, home ownership appears more affordable than many might think.
Sheryl Grider Whitehurst, regional vice president for the National Association of Realtors, says that despite the potential attractiveness of renting, most people want to own a home at some point in their lives.
“Overwhelmingly, Americans see home ownership as a good investment,” she says. “You have to pay to live somewhere – whether you rent or own. You just have to know when is the right time for you.”
The economics of where you live certainly weigh heavily on the decision to buy or rent, but what other factors should you consider?
After 20 years of owning a three-bedroom, three-bath, two-story home on a steeply sloped lot, empty nesters Gay and Harry Stephens were ready to downsize. They now live in a two-bedroom, two-bath apartment in a building that was once an all-girls Catholic school in Newport, Kentucky.
“We wanted to rent because it’s easier to take care of and we have the ability to turn the key and walk away when traveling,” she says. “There’s no yard work, and someone else is now responsible when there are maintenance issues.”
Gay Stephens says the couple also likes their location and accessibility to favorite restaurants and entertainment venues in Northern Kentucky and downtown Cincinnati.
“I was surprised how much I enjoy urban living,” she says, adding that there are some negatives to renting, such as slow response times for repairs and not building equity through their housing costs.
Other disadvantages to renting can include unanticipated rent increases, non-renewal of a lease, and not being able to customize the living space.
“On the other hand, you’re not tied to the property nor do you have to come up with a down payment and closing costs to live there,” says Realtor Josh Bushner in Austin, Texas. “If you’re new to a city or not sure you’ll be there for longer than three years, I usually recommend renting until you’re certain you’ll be staying longer. Also, make sure coming up with a down payment won’t put you in a cash-strapped position. Take time to get familiar with a city and find neighborhoods that will meet your lifestyle.”
Home equity is one of the biggest assets to buying instead of renting. In addition, most buyers can obtain tax benefits by writing off real estate taxes, mortgage interest, and specific closing costs, whereas renters don’t typically get federal tax deductions. Although, some states will offer a tax break for renters.
In addition, home renters often don’t realize that they’re paying the principle, interest, taxes, and insurance (and usually some extra padding for landlord repairs) in their monthly payments, which could be put toward building equity in their own homes.
Newlywed Leslie Radigan-Yodice of Albuquerque, New Mexico, initially thought she and her expanded family would move from an apartment into a rental home, but after figuring out the finances, they decided in the summer of 2014 that it was a great time to buy.
“My monthly payment is about $300 more, but we have a four bedroom, two-bath house with a garage,” she says. “I love that we’re building equity while creating a true home. And I love that I don’t have to walk across the street to do my laundry.”
Sometimes, the decision to own a home comes down to certain intangibles.
“While there’s definitely a strict financial answer to whether it’s better to rent versus buy, don’t discount the emotional part of the process,” says Deb Agliano of Re/Max Andrew Realty in Medford, Massachusetts. “For some people, it’s not a matter of what makes more financial sense, emotionally they want to know that they own their own home.”
