Deciding whether to buy or rent a home? Weigh both of your options and take into consideration price, your lifestyle and your overall goals. Below we highlight the pros and cons of pursuing the rental path.
Renting a home has its benefits. The first and most important one being price. Unlike owning a home, the down payment is not a factor. You will be required to pay rent every month and more than likely a security deposit up-front. However, you will know these fees at the very beginning of your lease. This means that your monthly housing cost will be fixed for the length of your lease. These agreements can be as short as a month-to-month contract or even reach to a two-year rental agreement. Best of all, repairs and general maintenance are usually included when you sign on the dotted line.
There is usually a bit of flexibility when it comes to your lease. Depending on what you’re looking for, renters are typically able to sign a lease that is less than a year, right at 12 months or even longer in length. This means that if you’re not entirely sure what your next move will be or how long you intend on staying in a particular location, you and the landlord can decide what works best for your contract and timeline. Even if for unexpected reasons you have to break the lease, the financial consequences are smaller than reselling a home at a loss.
Less freedom and guarantee
When you rent, all of the money you spend is purely an expense. Unlike homeownership, there’s no ability to gain equity. Since this isn’t an investment, the home is solely serving the purpose of providing you a place to live.
Renting also means you are at the mercy of guidelines provided by the landlord. If you are eager to paint the walls or bring home a pet, you may not be able to do so under the rules of your apartment or home rental. It is not up to your discretion to make these decisions, although they are usually highlighted up-front before you sign the lease.
There are also fewer guarantees about the future. At the end of your lease, there is no assurance for a re-sign. For example, the landlord might be interested in selling the space completely or have an opportunity to rent it out at a higher price than you can pay. In this scenario, you would be forced to find a different home. The risk factors include being forced out of your desired neighborhood or being unable to find a new home at a similar price.
Further costs can also be associated with renting due to more frequent moves. By the time you hire a moving company or truck and put down new deposits on your lease and/or utilities, the expenses will begin to add up. It’s also important to consider the time you’ll spend packing up, unloading and getting settled.
For more on the pros and cons of renting versus buying, including weighing your options on the purchasing side, visit the Elevations blog at elevationscu.com/mortgageblog.