In 2021, it seems like everything is changing rapidly. The economy is rebounding, people are vaccinated, and everyone wants a house!
You may be wondering, should I make a change too? Is it worth it to buy a house?
The most substantial difference is the level of financial investment involved. Buying a house requires a substantial upfront down payment, but renting means you are paying money to someone else and don’t see any direct financial gain from it.
Use this handy guide to help you explore the pros and cons of renting vs. buying or selling a house!
Pros of Renting vs. Buying or Selling A House
1. Lower Upfront Costs
Sure, you will need to pay a security deposit when you rent. You may even expect some other extra fees to activate your utilities and internet. But those costs are nothing compared to what it takes to make an average down payment of 6% of the home price plus closing costs on a home purchase!
Additionally, your rent will not vary month-to-month or be subject to immediate market changes, so you can easily calculate your projected move-in expenses for a rental without extensive research and financial planning.
With this extra money, you may be able to invest your extra money in other avenues!
2. Access to a Landlord
When you rent, you have a landlord. The landlord is the person you call if anything goes wrong with the property. The landlord handles all aspects of basic upkeep and emergency repairs, saving you both time and money.
For instance, if your air conditioning breaks down in the middle of summer, your landlord will be able to coordinate the repair ASAP with their preferred service provider – at no cost to you.
3. Flexible Terms
Think about renting if your lifestyle requires the ability to easily make location changes. If your job requires you to uproot with little notice, then you may be interested in a short-term lease rental.
You may also benefit from renting first if you are new to an area and want to test out different neighborhoods before making a long-term home purchases commitment!
Cons of Renting
1. Pesky Rent Increases
Once you hit the end of your first lease term, you will probably receive a letter from your landlord that your rent is going to increase when you renew. This isn’t great…. because you might not be able to afford the new price!
Renting is not always as straightforward as it seems. Some aspects are a bit unpredictable. You may find that you have noisy neighbors or the condition of your unit isn’t quite what you were expecting.
You could also be asked to leave your rental at any time. A landlord can sell the property or decide to stop renting altogether. This is particularly problematic if you have a family that would be impacted and you need to live in a specific school district.
3. Lack of Investment
Renting does have a certain characteristic of impermanence to it. Your neighbors will come and go. You will never see any returns on your monthly rent payment, so it can feel like your money is going to waste. You will not obtain any equity.
Renters are also subject to rules and guidelines that may prevent customization or growth. This may make it hard to feel truly at home in your rental.
Pros of Buying or Selling a House
1. Build Your Assets
When you own a home, you build equity. Each monthly payment goes toward lowering your overall mortgage loan amount. It is possible to one day own the home outright.
Additionally, the value of your home can increase! Aim to keep your property in great shape. Pay attention to popular neighborhoods or cities experiencing growth when you buy your home. It is important to understand home selling basics long before you ever put your house on the market!
2. Long Term Financial Savings
Over time, buying a house can save you money. To capitalize on the perks of buying or selling, plan to be in the home for at least 5 years to receive the benefits. The longer you keep your home, the more your investment will pay off.
To maximize savings, opt for a fixed-rate mortgage to ensure your interest rate does not fluctuate with the economy.
3. Freedom to Customize
With homeownership comes great freedom! You may have a large yard where you can grow a garden, you could get your own pool, or you can simply enjoy a larger amount of space. You can paint your walls wild colors, remodel any time you want, and personalize the space. This factor carries a heavy weight for some people. This peace of mind is hard to measure in dollar signs.
You may feel a strong sense of belonging and community as a homeowner. Purchasing a home is a huge life goal for some – and achieving that milestone can be really rewarding.
Cons of Buying or Selling A Home
1. Hefty Hidden Costs
People often make the mistake of thinking a mortgage is the only payment associated with a house. Unfortunately, there is also the property tax, homeowner’s insurance, and possible homeowner association fees.
You also maintain full responsibility when problems arise with your home. Unexpected damages or repairs can cost upwards of thousands of dollars.. Factor in recurring upkeep like lawn service and pest control when you make your budget, too.
2. Risk of Depreciation
While we wish everyone’s home value could increase, there is a risk that your house could lose value by the time you sell. The status and safety of your neighborhood could decline. The area could become oversaturated with housing options. The population of the town could decrease due to economic factors.
3. Moving Timeline
When you decide to take a job in another city, you can’t just move out of your home overnight. It will take time to prepare your home to sell, plus an additional 30-60 days to close escrow. If you are looking to buy a new house as part of your move, you will be working through both selling and buying at the same time.
Take Advantage of Our Resources
If you choose to buy or sell your home, you can benefit from insider tips while you are on the journey towards becoming a homeowner.
Contact New Venture Escrow to learn more about escrow and how to have a stress-free closing.
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