Confused between buying or renting a home? Here is a comparison

Highlights

  • There are a lot of factors taken into consideration to finally consider one option out of the two.
  • If your house is on a down payment, then you will be paying off a part of the loan every month which puts some burden on your pocket.
  • Renting a house gives the flexibility to relocate once your lease has expired.

Owning a home is one of the ultimate goals of many people. Who would not want to live in one’s very own place which will save their monthly rent and also may be from a few smaller feuds with the landlord. However, while it might seem an obvious choice over renting a home or an apartment, it may not be true in every case.

A house

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The choice between buying or renting a home is always a difficult one. It is commonly observed that the people who can afford to buy a home generally go for it and don’t even consider the option of renting. There are a lot of factors taken into consideration to finally consider one option out of the two. Let us have a brief look into what are some of the pros and cons you should consider while looking for a new place as your home.

Read More: 10 tips for Aussie investors to buy property in 2022

Renting a house

  1. Pros
  • Renting a house frees up some of your savings as you are not spending all of them on a hefty deposit and all other costs associated with buying a home. The leftover savings can be spent towards other investment avenues or could be saved up for other important expenses.
  • It also gives the flexibility to relocate once your lease has expired. Whereas buying a house does not give that much flexibility.
  1. Cons
  • Renting for a long time might gradually become expensive over a long haul due to inflation and subsequent increase in property prices. This is also reflected in the monthly outflow towards rent, against which, buying a property once might seem a cheaper option.
  • One does not get any benefit from the appreciation of the value of the concerned property as there is no equity invested in that property.

Buying a house

  1. Pros
  • Buying a home gives immense stability to the houseowner and a sense of freedom as there is no risk of default on rent payments and no worries to be displaced by the landlord. Also, there are no rules and restrictions which a landlord might put on their tenant.
  • A house is an owner’s asset in which their equity is invested. Therefore, any rise in the value of the property would directly benefit the owner. However, depending upon current dynamics of the housing market, the prices could also fall, but generally, they rise in the long run.
  1. Cons
  • If your house is on a down payment, then you will be paying off a part of the loan every month, which puts some burden on the pocket. Also, if the mortgage is on a variable interest rate and these rates rise in the future, the interest payment would also be a notch higher.
  • Tying a huge chunk of personal net worth into a property could become an opportunity cost to the owner. It is the cost one incurs by letting go the opportunity to invest elsewhere as the money is tied up in a single investment.

Bottom Line

There is no answer to whether buying a house is a better option than renting or vice versa. There are many factors to consider while deciding between buying or renting a house and different options could suit different people.   

Read More: Impact of climate change policies on housing market

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