September 28, 2015

Renting VS Buying a House

Would you rather rent or buy a house? This is the most pressing issue nowadays. However, the right answer lies on the particular circumstances of the person such as the current financial situation.

 In making a decision, let's take a look at the pros and cons first. This is the necessary first step so you won't fall into the common renting or buying pitfalls.





Renting

Yes, rent now

Renting requires no maintenance. If something needs fixing, you simply need to call the homeowner's attention or the property manager's to arrange with the in-house or local plumber, electrician, etc. Importantly, you need not save for the upkeep fund because the owner is the one to do it.

Moving to another place is easier. If a career-oriented relocation opportunity presents itself, you may grab such opportunity without having second thoughts. Also, you can save yourself from the hassles of selling your home. 

A house can be a depreciating asset. With the subprime crisis of 2008 in mind, it isn't guaranteed that a house will increase in value in the coming years. There are many factors at play including its location. 

No, don't rent

Money rental fees are rising steadily. In many cities across the country, monthly rents are increasing. Negotiating the rent is possible, but you can't count on it. The rent may increase immediately after finishing the current lease.

There's no way to build an equity against the property. The house can only provide you a place to live. Thus, it cannot provide you with a salable asset if in case you want to move out of it.

No tax benefits. Mortgage interest and property taxes are deductible from a homeowner's federal income tax. Renters are not covered by these deductibles.

Limited interior design choices. In making changes to the apartment, you need to obtain the owner's permission first especially if you want the place repainted. Approval may be lengthy too, depending on who are involved in the decision-making process.

Buying

Yes, buy now

Building equity. Historically, residential properties rise in value between 4% and 6% annually. Even if your property is not increasing its value, you can still build equity upon paying the monthly amortization.

Homeowners receive tax breaks. Deductions from federal income taxes can be used in offsetting the monthly repayments.

Monthly repayments are relatively stable. For fixed-rate mortgages, monthly amortizations stay the same throughout the loan tenure. Only the property tax and home insurance are changing from time to time. 

Settling in a community. Homeownership may also mean deeper involvement in your community because you'd know that you will be staying there for many years. Your actions are often geared toward at making your community a better place for everybody.

Decorating as to your heart's content. Basically, you have the freedom to style your house any way you please. 

No, not too fast

Paying for own maintenance. Costs of upkeep are all yours to shoulder. Also, you need to save money to cover unexpected repairs. 

Home as illiquid assets. If faced with the need to relocate due to an unexpected change in circumstances, selling your home is not that easy. Even if you sell it, you won't be able to rake in as much money as you want. 

Buying requires upfront payment. Definitely, you cannot buy a house without down payment. There are other related costs such as closing costs, documentation, etc. 

Home insurance is required. For mortgaged properties, an insurance is mandatory. The majority of lenders in the US requires that the borrower to insure the property. Paying monthly amortization along with monthly premiums is rather difficult. 

Evidently, there is value in renting or buying a property. Homeownership is a long-term commitment hence, it is not for everyone. Renting, on the other hand, is more lenient to short-term goals. As such, it is a matter of decision depending on which can provide you with a more cost-effective solution. 

Author Bio:

Harry Neal is a blogger and a freelance writer. He writes about insurance, and different investments like condominiums in Bonifacio Global City in the Philippines.

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