Many people compare the pros and cons list when it comes to difficult choices. It is simple, make a list about a topic, place the aspects you like in one column and take what you do not like, and put it in the other column. It is a straightforward way to validate a decision, and it is effective because it gets to the heart of the issue at hand: What do you want?
Similarly, this is an effective tool for deciding between renting and buying, as looking at the pros and cons of the whole situation will determine what each’s strengths and weaknesses are. You can look at the decision in a way that allows you to evaluate what you want and see which better fits. Neither of these options is perfect in every situation, or there would not be a question. So, let us look at the pros and cons of renting and buying, and size them up, side by side.
Up-front Costs
One of the first thoughts you will undoubtedly think about when deciding between renting and buying is the cost. When it comes to the up-front cost of the two options, the pro goes to renting. When you initially rent a home, you will need to pay a security deposit, typically a month’s rent. A security deposit is significantly cheaper than the beginning costs of buying a home, which can be very expensive. First, you need a down payment, which is typically between 5 % and 20% of the overall cost of the home, and then you need to pay for closing costs, which is about another 5% in addition.
Cost over time
Over time, however, the costs of buying a home can be less expensive than renting. With each new lease, there is typically an increase in your rent, somewhere between 3% and 5%. So, depending on how long you plan to stay in one place, buying a home could be the cheaper option as you start to pay more of the principal on your loan instead of the interest.
Buying also brings up the idea of equity. Over time, when paying off your mortgage, you will be building equity in the home. Equity is an asset that you could sell later on and make money off of if the market and the location you are in continue to rise year-over-year. However, home equity is a double-edged sword. Depending on the area you are in, the home could lose value.
Flexibility
When considering how long you plan to stay in a home, you also need to consider the flexibility of your decision. When a lease is up for an apartment, you can leave and find another place to live, or you can renew the lease. Renting allows you the flexibility to move more often if that is something you want to do. In contrast, a home will take time to sell, which means moving is not as simple.
If you plan to settle into an area, flexibility is not as important to you in this decision. But, if you are not planning to stay long and have plans to move to another area in a few years, the flexibility of renting is a huge pro.
Maintenance and Time
One major pro for renting a home is that maintenance is done and paid for by the landlord. Though it will probably take more time than hiring someone yourself or doing it yourself, you are not expected to spend the time or money to fix it. When you own a home that needs maintenance, however, you will be the one spending time and money fixing it. You can hire someone or do it yourself, and it will most likely get done faster than an apartment’s issue, but in the end, you are paying for it in time or money. This one is a pro for renting if you do not want to deal with the maintenance of a home, but it is a pro for buying if you do. If you have the skill set required for certain tasks around a home, it may not matter if you have to do it yourself.
Customizability
One of the main reasons someone would prefer to buy and own a home is that it is theirs to do with as they please, within certain limits. There is the freedom in owning a home that allows you to customize it to the way you want it. Customization can be demonstrated with something as simple as painting the walls. In an apartment, there is a limit to what you can do to it. You can certainly make it feel like home by decorating it with your style. But most rentals have rules when it comes to painting the walls, you can do it, but you will have to paint it back to the original color when you leave. While this is a simple example, the freedom to do what you want when buying a home is a major pro.
Final thoughts
What is taught to many in America is that part of the American Dream is to own a home. However, it is not how everyone envisions their life, and is why renting may appeal more to some people. Neither decision is wrong, it just depends on what you want. This list of pros and cons for renting and buying should have helped you decide what is important to you and what you would prefer to do. Whether you are looking to buy or rent a home, Movoto can help you do that.
