People often find themselves in their mid-to-late twenties contemplating whether they should purchase a home. Whether you’ve found your first grown-up job, gotten married recently or are just trying to put down some roots, buying a house can seem like the most reasonable next step in your life. But that doesn’t mean it’s right for everyone. Depending on your overall goals and lifestyle, renting could be a better fit. We’ve laid out some pros and cons associated with both owning and leasing a home. Before you begin scouring the web for your dream house, and certainly before signing any paperwork, take a moment to read through this article and think about which option is best for you.
Owning a Home
One of the main advantages of owning a home is the tax benefit it provides. Generally, mortgage interest and property taxes can be deducted. Renters do not get this benefit.
With each payment you make to your mortgage you’re actually building equity, which is the difference between the market value of your home and your outstanding loan balance. Home values tend to rise each year, but even if a home maintains the same value you’re still paying off your principle loan balance and thus increasing your equity.
Looking to remodel that 90’s style bathroom? How about painting your front door a funky new color? If you own your home, you more than likely have the freedom to do whatever you please. There’s no landlord to answer to and no chances of losing your security deposit or being evicted. Moreover, taking on a home improvement project as a renter is likely to be a waste of money, since you’re not the one to benefit from increasing the home’s value.
Depending on the home’s price, down payment and type of loan you’re approved for, you could be paying for your home for 30 years. Of course you can pay off loans sooner, but it’s still a long-term commitment that many people are uncomfortable with. What happens if you lose your job? Or become the victim of identity theft? The unforeseeable future is a major disadvantage. The bank can take your home if you’re unable to pay for it, and ruin your credit as a result.
Are you accustomed to calling your landlord when your air conditioner gives out, or when you notice an unwanted trail of ants in your kitchen? The bad news is that owners are responsible for each and every aspect of a home. That means you’re the one picking up the bill to have appliances repaired or replaced, or any other maintenance that needs to be performed on your home. With great power comes great responsibility.
Renting a Home
A main reason for renting is the ability to move around as opportunities arise. Lease terms are usually short periods of time, such as six months to a year. And breaking a lease isn’t the end of the world if you land your dream job across the country.
There’s no down payment to rent a home, but perhaps you’ll have to pay first and last month’s rent. At any rate, the money you’ll be required to pay up front as a renter is usually significantly less than what you’d be responsible for as a homeowner. Additionally, a security deposit may be required to rent but you’ll probably get it back at the end of your lease. And although this isn’t always the case, renting a home is generally more affordable per month.
Costs Aren’t Fixed
With fixed-rate mortgages, payments will remain stable throughout the life of a home loan. This is not the case for renting, however. Market value and demand will greatly influence your monthly rate, and many times rent payments increase the longer you stay at a place. When another entity is making decisions, you have no say in what your rent costs are.
Limited in Decorating Choices
As mentioned before, you won’t have the freedom to make many changes to your home’s aesthetic as a renter. This is often outlined in lease agreements, and even if you’re able to paint the walls you’ll probably still be required to paint them white again before you leave. If you wish to have complete creative freedom in a home, purchasing is a better choice.
There’s plenty more to consider than just the basics I’ve outlined above. While the housing market has been stabilizing recently, real estate is never an investment that should be taken lightly. If you think you’re ready to invest in a home, contact a Network Real Estate agent to go over all your questions before you decide to make the commitment.
Kevin McKoy is a GRI-certified, licensed real estate broker at Network Real Estate, which has exclusively served a high volume of property sales and purchases in the greater Wilmington area for over 30 years. With three offices at College Road, Historic Downtown and Pleasure Island, Network’s brokers are widespread and well-versed in this marketplace, making Network a preferred Real Estate company for first-home buyers and beyond.
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