Homeownership has been long associated with the American Dream, yet the economic climate of recent years has left some potential homebuyers on edge. Many potential homeowners have put their dream of buying a home on pause – or even abandoned it altogether.
If you’re thinking of buying a home but aren’t sure if it makes sense for you right now, consider these pros and cons of renting versus buying:
Pros of renting
- Renting is a short-term commitment. You can sign a lease and have the flexibility to move somewhere else after the lease is over.
- Maintenance and repairs are typically handled by the landlord, saving you time and money. Additionally, taxes and other local expenses are also often covered by the landlord.
- If you live in a city with high property taxes, renting may be more affordable, helping to reduce the costs of your monthly payments.
- Move in costs may be less, often including a security deposit and/or first and last month’s rent vs. saving for a down payment and closing costs.
Cons of renting
- Your landlord or management company may increase the rent upon lease renewal.
- Renting may offer less stability. Besides the possibility of higher prices, your landlord could sell the property or change other lease terms during renewal.
- There’s an overall lack of control. For example, repairs are on someone else’s timeline and you can’t make major alterations without permission.
- Paying your monthly rent doesn’t contribute to building equity, which means it can’t be used as a long-term wealth building strategy or as a way to tap into your assets for a cash need.
Pros of buying
- You can build equity by making consistent payments on your mortgage. Your equity may be a potentially valuable appreciating investment and can be used for a cash-out refinance or a HELOC, which lets you borrow against the equity you’ve built up. Homeowners often use this cash for home renovations or to pay off higher-interest debt.
- Fixed mortgage rate options provide more predictability and stability for monthly payments, unlike rent which may be increased with renewal.
- Qualifying homeowners might be eligible for mortgage tax benefits.
- Homeowners are free to alter, decorate and renovate without landlord approval.
- Your home value may appreciate with time, offering a potential profit when you sell your home. You might also be able to rent out your property for extra cash flow.
- If you live in a city with low property taxes but high rent, buying might be more affordable in the long term.
Cons of buying
- Homebuying typically comes with significant upfront costs and fees, such as a down payment, closing costs, loan applications and more.
- You have to pay for all maintenance and repairs.
- Building equity takes time, requiring a longer commitment to see a potential for significant returns.
- Your home’s market value can fluctuate for reasons beyond your control, such as interest rates, economic factors, and other market conditions.
- Homeowners have to pay for property taxes and home insurance, adding to the costs of homeownership. Your property may also have condo or homeowners’ association fees.
Making your decision
There are many things to consider when deciding to rent or buy a home, including how much you can afford, the length of time you plan to live there and how much responsibility you’re ready to take on. You’ll want to look into the current real estate prices and interest rates in your area to see if you can afford to buy a home now.
The bottom line is that the question of renting or owning is really a lifestyle choice. If you’re ready to stay in one location and have the financial stability to handle property ownership and home maintenance, consider setting a goal to buy a home. If you still crave flexibility or plan to move soon, renting may be your ideal solution. There are also a variety of local resources that can help you assess what makes the most sense for your personal circumstances, such as meeting with a local mortgage professional that can help you navigate the market as well as make suggestions based on your financial picture.
Your unique financial situation, goals and aspirations can help you make the best decision – for you.
Visit chase.com/afford to learn more about homeownership and what resources are available.
