Financial Fitness: Should I Buy a House or Rent?
This guest article from Hunter Munch tackles the perennial debate between buying a house and renting.
A frequent topic of discussion, particularly among millennials, is whether they should buy or rent their home. Owning a home, when you’re ready, can be extremely fulfilling. Calling this a big decision, however, would be an understatement. It’s one of the biggest financial decisions of most peoples’ lives. That’s why this article won’t make that decision for you. Instead, it’s aim is to weigh the pros and cons and explore different variables that could affect your decision. So, let’s dive right in!
Potential Costs Repairs and Maintenance
Owning a home, once again, can be incredibly fulfilling. With that fulfillment will come great responsibility and potential burden. Making the decision to own allows you to take matters into your own hands with what you do to the home. That also entails anything negative that happens to the home (repairs, maintenance, modifications). Coming from someone who has owned and rented, these “fixes” can add up fast. On the other hand, when things go wrong when renting, it’s the landlord’s expense unless you caused it.
Owning Is Cheaper on a Monthly Basis
Contrary to popular belief, owning a home can be less expensive than renting on a monthly payment basis. You are just paying for the house, instead of paying the landlord who is paying the mortgage and covering his/her ROI on the property. With the correct market, you are also looking at putting equity into your home with each payment. With renting, the money is never won back. Owning a home is an investment, in most cases. Given the correct circumstances, you can profit from the sale.
The Down Payment
Up front cost is a big determining factor in the decision of owning or renting. With renting, you will pay a deposit and a month’s rent to get everything started, which is relatively inexpensive. Depending on many factors, you may qualify for lower down payments on a mortgage. However, the 20% down number will ensure the best interest rates and keep you in line with a house you can afford. No matter the cost of a home, 20% is a significant amount of cash. Keep in mind, that 20% will be instant equity on the house. Many people even make the effort to produce a little extra value to the home, which isn’t a difficult task and can improve the homes look and feel while you are living there.
The Flexibility of Renting
A deciding factor on the renting side of the argument is flexibility constraints. Going through changes in our early adult years means changing jobs, income fluctuation, new purchases, and significant others. With these changes, lifestyle flexibility is a great thing to have. You may think selling the house is an option, but it may take longer than you are comfortable with. I’ve seen homes sell in 24 hours, and I’ve seen them sit on the market for over a year. It’s a coin flip. A commitment of this magnitude could hinder our ability to create or capitalize on new opportunities.
The Solution During Your Decision-Making Process
There will be plenty to think about and consider when the time comes where you face the option of buying or owning. Do your research, pick up a few household skills such as basic painting, plumbing, electrical, carpentry and take a good look at your financial situation and the future of your job, relationships, and opportunities. The solution I recommend is saving money, regardless of your short-term plans. Saving until you’re certain on the route you want to go will give you the power to make the best decision at the right time. There’s no need to rush this decision.
Good luck in your future endeavors! Until next time.
You can find Hunter on Instagram here.