Buying a home is considered to be one of those things that is a rite of passage to the American Dream. However, with the ups and downs in the current economy since the housing crash and recession that hit the country from 2007 to 2009, many people have reevaluated their options and find other types of housing such as renting, according to Investopedia. Although renting isn't the ideal situation for some, both renting and owning have pros and cons. The following are some of the many things to consider when pondering renting versus buying:
The Pros of Home Ownership
- Buying a home is an investment. In a perfect world, or one that doesn't suffer a great economical downfall, a home's value should increase each year.
- A portion of property taxes are deductible, the interest paid on a mortgage is deductible and a portion of closing costs on a home may be deductible. A buyer can calculate the tax benefits prior to buying as suggested by Fidelity.
- Buying a home can bring an individual, couple or a family stability. This is a place where one can plant roots and belong to a community.
The Pros of Renting
- Renting offers more financial flexibility, as reported by Investopedia. There isn't the responsibility of paying property taxes, homeowners insurance, utilities and the other monthly expenses that come along with owning a home.
- A renter is not responsible for the upkeep on a property, therefore, doesn't incur expenses such as replacing or repairing appliances, a roof or any problems with plumbing or electrical.
- Monthly expenses are more predictable when renting. It is usually the cost of rent and renter's insurance, if a person decides to have this coverage.
The Cons of Home Ownership
- Home ownership might not be the best option for the person who travels frequently for pleasure or business. It is also probably not the best option for the nomadic type of person either.
- If a person plans on moving often, selling a home and buying a new home can become costly. The closing costs can be expensive and have to be absorbed, and if a property is held for less than two years, a homeowner might have to pay capital gains taxes, according to Fidelity.
- The cost of owning a home can be much higher than renting. A monthly mortgage payment isn't going toward much of the principal amount of the mortgage in the early stages of the loan and is mostly going to pay interest on the loan, as stated by Investopedia. There are also all of the utilities, property taxes and homeowners insurance.
The Cons of Renting
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- When renting, there could be a possibility a tenant could be forced to move if a landlord decides to sell the property.
- The cost of rent can increase yearly, or more frequently, according to the terms of a lease.
- The monthly rent paid is not building equity into anything tangible.
- A renter is not in control of who the neighbors might be. There could be several units in a building and the chance of noise coming from surrounding apartments.