Should You Rent Or Buy Your Home?
For many people one of the biggest decisions they have to make is when to move out of the family home. Let's face it - you can't live in Mom and Dad's basement forever.
For the young adult moving out means heading off to pursue post secondary education. This person will most likely rent an apartment or room on campus or very close to there. It simply wouldn't make much sense to purchase a home in this situation - unless the cost of purchasing works out to be less than the cost of renting.
Once your education is complete and you've settled into a job you are in a better position to decide if purchasing a house is the better alternative to renting.
There are pro's and con's to both renting and purchasing a home so lets look at some of them.
Advantages to renting a home:
· flexibility - you are not committed to the location. You can choose to move with little or no penalty
· no maintenance - the landlord is responsible for regular repairs and maintenance on the property
· lower costs - the cost of rent will typically be less than the cost of a mortgage leaving money available for other things
Disadvantage of renting a home:
· you will be paying rent forever which in the end will be considerably more than the cost of a mortgage
· you are at the mercy of the landlord as far as rent increases and the possibility of your property being sold
· competition may be high for the location and type of accommodations you want. You may have to settle for something inferior.
Advantages to owning a home:
· equity - your home can be considered a long term investment that should appreciate over time
· payments though higher than renting eventually stop making money available for other things
· you can do want you want with your property without having to get approval from a landlord
Disadvantages of owning a home:
· you are committed to one area long term although you could sell home
· monthly payments are more than a rental payment but your payments won't increase with inflation like rent tends to do
· you are responsible for regular maintenance and repairs
From strictly a long term financial perspective home ownership is almost always a better option to renting. As a homeowner you own equity that will typically appreciate over time. This equity will provide security for loans and a source of capital should you choose to sell.
Renting is a viable option for people that are moving around regularly or don't want the hassle of regular maintenance and upkeep. Renting is a more practical option for those individuals that can't afford a new home or when a home is not available for purchase in the area you want to live in.
In the end there is no right or wrong when it comes to renting verses buying a home. It all boils down to what you want and what you can afford.