Is It Cheaper to Rent or Own a House? Pros & Cons of Renting vs. Buying

January 19th, 2022

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To rent or to own? If you are planning on moving and are financially stable enough to potentially qualify for a mortgage, there is a lot for you to consider. Buying a home usually requires a down payment plus closing costs; renting also comes with its own fees, but those are generally less than you will need to buy a home. Here, we will explore whether it is cheaper to rent or own a house and the pros and cons of both.

Buying a House

There is a sense of stability that comes with owning a home. This is your home; you can take pride in it and feel like you are part of a community. That feeling can be priceless. However, if you are a restless person or a nomad, homeownership may not be for you. Even if you do not own a home for the long haul, you are building equity each year which helps offset the extra cost of homeownership. If you end up hating your neighborhood, it is much harder and more expensive to leave than when you are a renter. Mortgage payments are often lower than rent; research has indicated that owning a home is cheaper than renting a three-bedroom home in 58 percent of the country. However, with mortgage rates rising, this may begin to shift toward renting being cheaper in the next few years.

Your monthly mortgage payment is locked in, and you do not need to worry about the landlord raising your rent. However, you now have to pay for all of the expenses for your home. If your roof starts leaking unexpectedly, you are the one who has to find a roofer, deal with the insurance company, and pay to have the roof repaired or replaced. When you rent, you just need to let the landlord know that the roof is leaking, and they will deal with the rest.

If you love DIY projects, owning a home is great; you can do whatever you want to fix up your property, and you do not need your landlord’s permission. However, if you live in an area with a homeowner’s association (HOA), you will have to get permission to do some things to your home because they have rules and restrictions for what someone is allowed to do to their home

Your home renovation projects can increase your property value, but it can take years before you will see a return on your investment for the projects. The projects that give the best return are nowhere near as fun as the ones you are more likely to choose. Replacing your garage door or getting new windows to better insulate your home may not be as fun as an upscale bathroom remodel, but they can deliver the best returns.

When someone thinks about buying a home, they usually think about building equity and increasing their personal wealth. However, this is not always the case. If your area of town suddenly becomes less desirable, your home can begin to depreciate in value. This can be caused by a number of things, like a major company leaving town and the population dropping as people move elsewhere to find new jobs. Of course, you can also find out that a home has built you significant wealth over a long period of time and can be a significant asset.

Renting a House

When you rent your house, you can move more easily when your lease ends, so you are not tied down in one location. It is much easier to move out of a house or apartment you are renting than it is to move out of one you own, as preparing a home to sell, marketing it, and going through contracts and title work can take a lot of time.

Your landlord can choose not to renew your lease, forcing you to move when you did not plan to. You also run the risk of the landlord selling the property or just upping your rent. It is even riskier if you have a month-to-month rental instead of a long-term lease because the landlord can randomly increase your rent without explaining why or they can kick you out.

If you live in one of the more desirable areas of town, you may be facing some steep rent increases, which can eventually price you out of your home. On the other hand, a mortgage is locked in, so even if your area becomes more desirable and rent begins skyrocketing around you, your mortgage payment is locked in. Renting a house is nowhere near as stable as owning a home.

One thing that is great about renting is that your landlord is responsible for upkeep like replacing rusty plumbing, repainting the exterior, and in some cases, even mowing the lawn and landscaping. So, you do not need to worry about budgeting those things in yourself.

Final Thoughts

When you are only looking at the overall prices of renting vs. owning a house, it is usually cheaper to rent. However, this is not a decision that can be made solely based on the numbers. Owning a home can give you a sense of pride in ownership that renting can never give you. Renting a home and owning a house both come with their own unique risks. Take the time to weigh those risks before you decide which one is right for you and your family.

Owning your home may give you some added expenses overall, but this is a choice that is more emotional than financial. When you own, you have a permanent place to raise your family, a home to pass on to your children, and it is completely yours. The desire to have a permanent place to call your home is a strong one for many people, which is why so many people choose it over renting.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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