Rent or Buy? A Critical Housing Decision

When starting out in life, we are usually faced with a critical decision about where we are going to live. Should we rent or buy a home?

Renting is usually the easier option of the two, given that you can live wherever you want and change your neighborhood to enjoy the convenience of commuting to your place of work, irrespective of where that may be.

On the other hand, home ownership requires very careful analysis given the long-term implications of taking out and servicing a mortgage.

Although renting or owning a home have their relative advantages and disadvantages, the ultimate decision will depend on your financial goals and what kind of lifestyle you envisage for yourself in your old age.

Renting

The biggest and most obvious advantage with renting is that it usually requires little financial commitment compared to buying a home, and you do not have to sell the property or find someone to lease it, should you decide to move.

You also do not need to worry about making a down payment or the pressure of making monthly mortgage payments at the cost of losing your property.

The major disadvantage with choosing to rent over buying a home is that your rental payments are nothing more than lodging fees.

You do not get to build any equity from your payments and lose out on converting your rental payments into a solid asset which ends up on your personal balance sheet.

Incidentally, the rent you are paying could be contributing towards paying off your landlord’s mortgage, and when you decide to stop working, you still have to look for a source of income to pay your rent when it is due.

For instance, if you were to rent a house for 7 years paying $800 a month, you will have paid a total of $67,200 at the end of that period. This amount could have gone towards building equity in your own home.

If the landlord was servicing a mortgage, you would have paid off a good chunk of it.

Buying a home

Home ownership can give you the advantage of living rent free for the rest of your life, and you will also have solid asset to pass on to your children and maybe even your grand children.

Rent increases with the cost of living and as a result, if you opt to rent, you will find yourself moving from place to place in order to fit the rent bill within your income.

Owning your home allows for more stability, allowing you to focus on other expenses and investments other than rent. You can also commit to making as many changes as you want when it comes to remodeling your home.

The perceived obstacles such as coming up with a down payment can be overcome with a little creativity. Other fears like losing equity as a result of a drop in the value of your home, misuse of equity release or foreclosure, can also be easily managed.

Once you have paid off your mortgage, you will always have a place to live, and if you wanted to move, you could always rent out your house and enjoy the rental income from your tenant.

You could also sell your house and buy another in a different location, enjoying rent-free status for as long as you like. The perceived or real obstacles to owning a house are more than compensated by the rewards of being a home owner.

Rent or Buy?

In the long run, owning your own home gives you many more advantages than renting because you have more control over where you live, even if the thought of long-term commitments scares you.

You also don’t have to worry about being homeless, should you lose your source of income, for as long as you own your home outright.

Procrastinating in making the decision to buy a home can actually make it harder to switch from renting, especially when the family starts to grow and you have numerous other bills competing for your paycheck.

The sooner you decide whether you are going to rent a house or apartment for the rest of your life, or buy a home and never have to pay rent to anybody, the better prepared you will be for the consequences of your decision.