We have all dreamed about buying a house and it is probably one of the main goals in life for almost everyone, but it is not always the best option. So let’s shed some light on this owning vs. renting matter.
As everything else, owning and renting both have pros and cons. Not only financially, but also in ways that affect your lifestyle and the way you experience your home. So let’s get down to business and see what those differences are:
While renting seems like —and, actually, is— giving away your money to a landlord, owning a property has many short-term costs that are very high: if you get a mortgage, you need to have 20% of the property value upfront, and then make your monthly payments for as long as your mortgage plan is, which in average is 30 years. You will also need to pay fees, taxes and an interest rate, which increases the total cost even more.
Renting, on the other hand, has few of this costs: taxes and fees are paid by the landlord, while the renter will only have to pay for a security deposit and, of course, the rent every month.
Although economic freedom is very important and having a roof over your head seems to be the ultimate goal when it comes to peace of mind, having a home might be a bit too permanent for some people. If your idea of freedom is more about being able to live anywhere you can afford and anytime you want, then you might be more comfortable with renting a place than buying one.
But this also means that if you rent, any upgrade or improvement you make to your house will be profitable for the landlord. While if you own, then these upgrades mean property appreciation for you.
There’s no secret here: whether you decide to get a mortgage and buy your house or you decide to rent, you’ll need to plan according to your income.
The difference is that if you opt for the first one, you have alternative ways of making your payment. For example, you can rent a room in your house and use that money to cover the mortgage payment, so you don’t have to deduct it from your main income.
If you rent, you need to also keep in mind that the living cost might increase for market reasons or simply because the landlord says so.
These simple items will help you determine which one is the best option for you at this particular moment. Of course you may revisit your plan on a regular basis to check if the option you selected is still the right for you.