Paying for a roof over your head has been one of the rites of passage for most individuals stepping out into adulthood. For most, “home” has primarily been in the form of owning a house. However, in recent years, renting has closed that gap significantly. With this change, I have had many conversations and read many articles debating which is better, renting or homeowning. Most of the arguments boil down to financial reasons. At the end of the day, both have merit, and both are a good option for different groups of people. I am going to highlight some of the common arguments used when debating renting or homeownership to hopefully give you a good idea of what might be right for you.
Before I get started, I want to clarify that some of the arguments listed here may carry a different weight in your area. If your market has soaring real-estate prices, but reasonable renting prices, renting may look way better. On the flip side, maybe the cost difference between the two are close enough in your area that a house makes more sense. Just remember that your area is going to affect how you view some of these listed arguments.
Arguments for renting
I will begin where many of us – including myself – started when venturing out on our own, renting. Renting has many great benefits for an individual looking to move into their first place. Some of the key benefits of renting are:
- A lower upfront cost
- Maintenance and repairs are covered
- Monthly payments are generally cheaper
- Credit is less of an issue
- Money saved on monthly payments can be applied to better investments
- Moving is less of a hassle
As one can see, renting has some great benefits. For most looking for that first place, the lower upfront cost, monthly rent price, and maintenance costs being covered are big selling points – I know they were for me. My first place took a month’s worth of rent as a deposit and provided me with ample room. What I paid in rent was also significantly cheaper than owning a home in the same area.
Arguments for homeowning
While renting shows immediate benefits, owning a home can take time to fully realize its benefits. Some of the key benefits of owning a home are:
- Monthly payments are essentially unchanging year to year
- Once you finish your payments, there are no more
- Your home can go up in value
- Tax credits can offset the cost
- More freedom to do what you desire to the home
Over time, as one can see, owning a house can have some significant financial benefits. Some might even call homeowning an investment. While it can be that, I feel – in most cases – it is more accurately described as a really good purchase that pays for itself. As such, it is not always the best option when starting out, unless of course, your situation allows for it. But there are few things that can help you on your way to financial freedom as a fully owned home. Another benefit that was not listed but was true for me was privacy. I shared walls with others in each place I rented, and sometimes those walls were thin. Moving to my own home allotted me privacy that renting was just not able to do.
General downsides
While each option does have its benefits, its downsides are mostly mirrored by the benefits of the other. Owning a home generally has a higher upfront cost, monthly payment, and requires you to pay for and/or do the repairs and maintenance. Also, owning a home generally comes with big debt. If you find yourself in a predicament where you cannot pay your mortgage, you may lose the house – including all the money you put into it.
In regards to renting, you never get any of the money back that was paid for rent, you will never “finish” paying rent, and rent prices can go up year to year. And while renting is generally better for small families, a bigger family may need more space, and this can be hard and expensive to find. I have seen homes for rent in my area be almost twice as expensive in rent payments as a monthly mortgage for the same place if renting a home.
Neither renting nor owning a home is perfect for everyone. Each comes with benefits and downside. Ultimately, we all come to the question, which is right for us? To answer that question, your situation and the area you live are going to play a big part. If you are unsure if you will be moving in the near future, renting might be a good option. If you have built up enough for a twenty percent down payment and want to start putting down roots, owning a home might be the right path forward for you.
What I decided for myself was to start out renting and after a few years of building up my savings, buy a home. Renting made plenty of sense starting out. I did not know enough to take care of all of the maintenance of a house, and I did not have the money built up to buy a home and still be fiscally responsible. Plus, I did not know if I was going to move in the next few years.
When I did buy a home, my wife and I had saved enough for a twenty percent down payment on a 30 year fixed mortgage. Personally, we saw immediate benefits to owning a home. Our mortgage payment was actually less than what we paid in rent – mainly due to the down payment. We got a bigger place with a yard and a garage, and while rent prices have gone up, our monthly cost has been near constant. We did have repairs we had to cover, but our home also appreciated in value.
My situation may be different from yours, but I give it as an example of how both renting and home owning have their benefits. One is not inherently better than the other, your situation and goals will determine that.
I hope one of the things you got out of this is that both options are viable. Your lifestyle, goals, financial situation, and the area you live will play a big role in highlighting which one is right for you. The key is to consider what you can reasonably afford. I recommend making a budget where your housing takes no more than 25% of your take-home pay. If owning a home fits in that budget, great. But do not go into buying a house thinking it will solve all your problems. Too many jump in financially unprepared due to the allure of the homeownership dream, and end up under a mountain of debt that cripples their financial situation.
While owning a home has many benefits, it should not be seen as completely superior to renting. Renting has benefits, and for many, it is the right choice. For those starting out who have determined renting is right for them, I would encourage you to enjoy the benefits of renting now, but still make homeownership a future goal. Owning a home can lead you to a place of financial independence that renting will never be able to match. To those that have decided homeownership is the right fit for them, I suggest reading up on ways to upkeep the large purchase that you have made so that you may enjoy it for many years to come.
Quote of the day: Nothing is better than going home to family and eating good food and relaxing. – Irina Shayk
