Even though homeownership is a long term goal many have, both renting and buying have their own set of advantages. You need to carefully decide which will suit you better in your current situation. Here are some of the main advantages each option boasts.
No Maintenance Costs or Repairs
A definite advantage in the favour of renting is that you don’t have the responsibility of maintenance costs or repair bills. When renting, your landlord is responsible for all these costs. If the stove stops working or your roof starts leaking, renters won’t have to shoulder the financial burden themselves.
No Real Estate Taxes
As a renter you would not have to pay real estate taxes, which can be a hefty burden for homeowners. They are generally based on the estimated property value of your house, so the more valuable the property, the higher the taxes.
No Big Down Payment
While renters are generally required to pay one or two month’s deposit, this is significantly less than the down payment you’d have to pay to be a home owner, which is usually a substantial amount. By renting you can avoid the high initial down payment costs.
Decreasing Property Value
When property values go up and down, homeowners are affected in a big way – especially in the unstable market we’ve been witnessing for the last few years. The market value of your home will determine the amount of property taxes you pay, the amount of your mortgage and more. However, a fluctuating market will have little effect on renters.
In today’s economy, it’s not easy to predict how the state of your finances will be a few years down the line. By renting, you have the option to downgrade into a more affordable living space if you need to. When you are a homeowner, it is much more difficult to change to a more affordable situation if needed, not only because of the fees involved with buying and selling a home, but also because property can take time to be sold at the price you want it to.
A tangible asset
When buying a property you gain a tangible asset on your balance sheet, which reflects financial strength. This is something banks like, and can be used to your advantage in many situations. Having property can also open up new cash lending options by acting as collateral for home equity loans and home equity line of credit, which has better repayment terms and lower interest rates than personal loans or credit cards.
You do not in fact have to be extraordinarily wealthy to be a homeowner. There are property finance options available to make owning your own home a feasible option. You just have to make sure that your financing plan suits your budget and income.
If done prudently, buying property can be a great investment. Not just because it will likely be worth more later than when you bought it, but because the payments you make towards it doesn’t count for nought as rent does. The amount you would pay each month for rent is money that you will never see again, but if you’re paying off your own home, those monthly costs are an investment, increasing the equity of your asset.
Your own terms
Renters have to live by the conditions that someone else makes. Although this often is not a problem, for many it is. Renters face restrictions regarding subletting, home modification, keeping pets and much more. As a home owner, you set your own terms.
As a home owner, you might be able to find yourself renting out a room in your home, or the entire property itself for some extra cash. You might be able to develop an additional flat on the property that you could rent out as well, effectively earning you a passive or second income.
The Bottom Line
ultimately it depends on your situation whether renting or buying would be better for you. While owning a home may be beneficial for citizens over a long period of time, for many people renting is still the better option, especially if they are not in a financially secure position. Don’t make a hasty decision, but review the details carefully and choose the option that’s right for you and your family.
About the Author
Queenie Bates is an avid reader, researcher and writer, based in Cape Town, South Africa.