Is it better to rent or to buy? Yes, this is the age-old question in real estate. Everywhere you go, you’ll find a different opinion about which choice is better. Depending on who you ask, you might be throwing your money away by renting or spending unnecessary funds on a bad housing investment.
After the recent housing crisis, more people are leaning towards renting than ever before. Here are a few reasons why renting might be a better financial decision than buying:
First off, let’s address the American misconception that owning a home is the best investment into your financial future. When you buy a home, you take out a loan out from the bank. Therefore, the bank technically owns your home until you can pay off the loan, which usually takes about 30 years. However, most Americans live in their homes for an average of 4 1/2 years. They often sell their home to relocate or to put a larger down payment on a bigger home. By doing so, they renew their 30-year loan and continue to pay thousands in interest for a longer period of time.
Banks make a huge profit via mortgages. There is about $15 trillion in mortgage debt within the United States alone. Banks and real estate agents would have you believe that buying a home is “The American Dream.” But, the truth is that it’s not always financially worthwhile to buy a house, unless you’re planning on staying there for at least five to seven years. Otherwise, you’re just investing your money in interest, property maintenance, closing costs, buying costs, title insurance, and property taxes.
There are also many factors to take into consideration when deciding whether to rent or to buy. You’ll need to consider where you live, how long you plan on staying there, and what kind of house you’re looking for. New York Times has one of the best rent vs. buy calculators out there to help you decide which option is best for you.
If you decide that buying isn’t a good option for you, you might want to consider renting. Here are a few pros about renting you may not have thought of before:
When you rent, you don’t have to worry about paying for repairs, maintenance, or any other issues that might occur. If you have a leaking pipe, you can call your landlord and he’ll fix it or hire a plumber. If you have flooding issues, you can sit back and relax while the landlord arranges new floors and mold removal. The money you might have spent on lawn care, and house repairs or updates could be put towards smart financial investments instead.
When you buy a house, you’re making a financial commitment to this property. You’re committing to the extra fees, property maintenance, and mortgage payments. Also, if you eventually decide you’d like to move, you’re responsible for selling your home and the extra fees that go along with that. And, what if you’re unable to sell your home? You’re stuck. You made that financial commitment and will be held to it whether you like it or not.
When you rent, however, moving is a lot less hassle. Even if you’re on a contract, there are often ways to get around it. You could either find someone to take your contract or you could just forego your deposit refund. Either way, it’s much easier and less stressful to move as a renter than it is to move as a buyer.
Years ago, if you wanted to build your credit score, you’d need to have a mortgage payment. Renting couldn’t help improve your score because no one was letting the credit bureaus know that you were paying your rent on time. With RentPlus, however, you can now build your credit score through renting just as well as you would with a mortgage payment.
When you rent, your money isn’t being thrown away, it’s being invested in a roof over your head. You’re paying for a place to live, similar to buying a house.
So when you’re looking for a place to live, do your research. Decide which option is best for you. Are you ready for the financial commitment of buying a house? Or would you prefer the financial freedom of renting? The choice is ultimately up to you.