Owning vs. Renting; Which is Right For You?

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Benefits of Owning vs. Renting

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Moving can be a complicated process that involves several decisions that may shape the rest of your life. One decision that will shape your entire moving process is deciding whether you want to buy and own a new home or if you want to rent a property from a landlord. There are different benefits to each approach to consider.

Renting Explained

Renting is about what you'd expect: you're paying to use somebody else's property for a period of time. The owner that rents the property to you is your landlord and the terms of your rental are taken care of in a lease. The lease states the time and terms for your rental. Renting is obviously meant to be temporary since leases have finite ends in place. Keep in mind that you will likely need renter's or tenant insurance in order for most landlords to consider making you a tenant.

Benefits of Renting

  • Because you didn't buy the property outright and are expected to leave at some point, renting is usually substantially cheaper than owning
  • You can choose your own level of commitment when signing a lease. Some leases allow for monthly terms, meaning that you can move out with only 30 days notice if you choose to do so. If you want a longer term deal, you could sign a lease that has a fixed term for any number of years
  • Cheaper housing like apartments are almost exclusively available as rentals
  • Paying for utilities is simple and often included in the rent
  • Apartment complexes or other group living situations could have access to shared amenities like pools, playgrounds, or laundry machines that would either be more expensive or more inconvenient for a home owner.

Drawbacks of Renting

  • Although there are exceptions when renting standalone houses, property available for renting is generally smaller than a typical house and you are often living in close proximity to others
  • Landlords can be bad people. A bad landlord will deceive you during the signing of the lease, trap you in a bad living situation, charge you exorbitant fees, evict you with little warning, or have poorly maintained living conditions
  • Landlords can set their own, sometimes arbitrary rules for living on their property. Pets are often not allowed
  • You will have to pay the landlord for any damage that you may have caused the property during your tenancy.
  • You do not have the freedom to alter the property in and substantial way
  • If utilities are included in the rent, you could be charged for a perceived average usage that exceeds your actual usage

Owning Explained

Most likely when you buy a home, you don't outright buy it for its full price. That's where mortgages come in. With a mortgage, a bank basically acts as your landlord. You will usually have a down payment for the home that is roughly 20 percent of its total value and then you will need to find a bank that will lend you the 80 percent to pay for the rest. That 80 percent gets paid back to the bank in monthly installments with interest in mortgage payments. If you fail to make those payments the bank can seize your home and sell it to somebody else to make up for the money you cost them. 

Benefits of Owning a Home

  • Once the mortgage is paid off, the house is completely yours and you only need to worry about property taxes
  • You can live in a home you own permanently and keep the house in your family estate when you die
  • Owned homes can be larger and more isolated than rentals
  • You can alter your home any way you see fit so long as you don't violate any town regulations
  • You can sell your home to other people, perhaps even making a profit
  • Utilities are paid for separately so you can work out your own deals with companies, go without TV services or use very little electricity in order to save money
  • Knowing that your home is really yours brings a certain peace of mind

Drawbacks of Owning a Home

  • It is more expensive than renting
  • Mortgages essentially mean that you are renting your house from a bank for the first thirty years or so that you live in your house
  • Interest rates could be unstable if you chose a mortgage plan with adjustable rates, so you may pay different interest monthly and that could end up costing you more than you thought it would
  • Foreclosure is a risk that can stress out homeowners for years
  • In order to receive a loan for a house from a bank in the first place, the bank needs to deem you an acceptable risk by checking your assets and credit score. You could be denied a loan if the bank thinks you are unlikely to keep up with mortgage payments
  • Paying for utilities is up to you and utilities could be discontinued if the utility companies aren't paid
There is no universal right or wrong answer when it comes to owning or renting a home. It depends on your financial and personal freedom and how long you plan on staying in that one location before you move again.

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on June 26, 2014

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