Dec 15, 2016

Rent or Buy a Home: Which is Better?

By Griff Christensen

The decision whether to rent or buy a home is one that most people consider at some point in their lives.  This decision is not just a practical financially motivated one, it's also an emotional one.  Having a home is not just a necessity, it's our comfort zone - a place where we find peace.  The expression "home is where the heart is" suggests that anywhere we find ourselves is a good place to be.  This might be true to some extent, but in the end we all want our own place in the world.  A place where we are who we want to be and live how we want to.  Whether one chooses to rent a home or buy, the fact remains the same: our home is a very important part of our lives.

There's a case to be made for both renting and buying.

Most of us rent a home when we're starting out as young adults.  This is because we don't feel the need to settle down and usually the financial requirements of buying a home are beyond our reach.  Buying a home usually requires a down payment and you'll need a credit history to get a mortgage.  As we grow in our careers it starts making more sense to buy.  While this seems a logical step to take, many prefer to rent even though they qualify for a mortgage and are capable of buying a place of their own.

So why do some people prefer to rent their home?

For many renters it's the freedom from responsibility.  If the roof leaks or a pipe bursts you just call the landlord and from then on it's their problem.  Owning your own home means that you have to keep up with the maintenance and repairs.  Of course one can argue that being in charge of your home's maintenance, means that you're in control of the situation.  Often landlords can neglect their duties or only do the absolute minimum that is required of them.  In many cases the owners of rental properties don't want to spend too much on the property - they can often cut corners and leave you to live in a place that's not quite up to scratch.  This isn't saying that all landlords are crooks, most of them have a really great attitude toward their tenants.  The point is that although it may be easier to pass the buck when it comes maintaining your home - making your own decisions on how things get done can be a great advantage.

A good point in favor of renting, is that it doesn't tie you down.

You might very well want the option to pack up and travel the world, or simply don't know where life will take you next.  You might be waiting for that perfect job offer that could end up being in another state or even another country.  So some might see owning a home as a burden.  If they decide to move they don't want to have the hassle of selling their home.  That being said, I know of several people who, after owning their own homes for many years decided to work for a year or more abroad.  All of them chose to rent out their homes while they were away, knowing they have somewhere to come back to.  It's true however that renting does give one freedom of movement and this is a big reason why many choose this option.

When it comes to the financial implications of renting versus owning it often seems easier to rent.

When you move into a rental property, you're usually only required to put down a security deposit of one month's rent.  Whereas the down payment on a mortgage can be a substantial amount of money - though one can get 100% mortgage loans, not everyone is eligible for this.  There's also no transfer costs or unexpected repair bills on a rental property.  For many, the financial obligation of buying a home might seem a little daunting.

The initial costs of buying a home are higher by comparison, there's no doubt that in the long term buying makes more sense.

For one thing your monthly payments are reducing the principal on your mortgage, this means that when you sell your home you'll get something back on your investment.  If you take into account that property values increase over time, there's usually a substantial profit to be made when the time comes to sell your home.  In many cases mortgage repayments are lower than the rental would be on a similar home and there are tax deductions applicable to the interest portion of your mortgage repayment.  All round, the long term financial implications of buying far outweigh that of renting.

A big advantage of buying a home is the emotional security it gives you.

Living in a home that you own means never having to get permission to make alterations.  You can change your home as your needs change - build on more rooms, redo the kitchen or make whatever changes you might want.  If you're living in a rental home and you find you need more space, your only option will be to move into a bigger place - this will probably mean a higher rental.  Owning your home gives long term security.  With a rental property you never know when the owner might decide to use the property for another purpose.  As a renter you can never be totally sure how long the place will be yours, since it's never really yours in the first place.

If one weighs the odds, buying definitely makes more sense.

If you're in a position to buy, there doesn't seem to be much reason to continue paying for some one else's property - it just doesn't make financial sense.  Renting does give you the freedom to pack up and go at any time and this is an advantage for some.  On the other hand buying a home isn't a lifetime commitment - it will however take a bit more planning if you want to move.  The main reason people prefer to buy, is probably for the peace of mind that it gives you.  The knowledge that this is your home. Owning your home means that it's worth putting the effort into making it the perfect place for you.  There's more than a sense of pride involved in buying your own home, it's a sense of security.

We would love to hear your thoughts.  Leave a comment or give us a call.  Let's see if buying a home is right for you.

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