Buying or Renting : which is better for you?

Whether to buy or rent a house is one of the major decisions in our life, most especially amidst this pandemic when our financial status is greatly affected by the crisis. Whatever decision we make will affect our lifestyle, the amount of money we will have at the end of the month, and how big our accumulated savings will be over the years.

So before making your final choice, let’s take a look first at the PROs and CONs of buying and renting a house.

A house is important for people because it is a place to put down their roots. Buying a house, owning a home is an investment that can grow and it can also be a source of tax deductions.

Despite being touted as a way to build wealth, homeownership has its own cons. Remember that your home can lose value. A lot of circumstances could cause a significant population decline and a surplus of housing, which means the house you bought for $50,000 today might still worth the same after 30 years. It’s a clear loss of money after inflation. Worst case if your house’s worth decreased over the years.

Many people choose owning over renting as it provides a more permanent place to raise children and in most cases, it is the only way for residency. Clearly, the decision to rent or to own is not just financial but also emotional.

Homeownership has a lot of intangible benefits, but is not for the restless or nomadic types of people. As an illiquid asset, real estate can’t be sold whenever you want whether the housing market is down or the market is up because of significant transaction costs.

Another con of buying or owning a house is that even though the monthly mortgage payment is similar to or lower than the monthly rent, the overall cost of homeownership is definitely higher than the overall cost of renting. There are a lot of expenses that a homeowner has to settle monthly, yearly or occasionally, that a renter doesn’t have to pay such as property taxes, repairs and maintenance, and insurances. If you’ll add up all these costs, you might realize that you’re better off financially by renting and if instead, you invested the money you would have put into a home into a retirement account or a profitable business.

Meanwhile, some of the benefits of renting are flexibility, predictable monthly expenses, and someone to handle repairs for you. These mean you can move without penalty each time your lease ends. However, there’s also cons like if your landlord decides to sell the property, you have to move suddenly. The landlord will take care of all the repairs and maintenance of the unit you are renting, but of course those may not be accomplished as quickly or as well as you would like if you are the homeowner.

Unpredictable rent increases each time the lease is up for renewal, is another problem a renter might face. Worse, they could just bump up the rent to more than you can afford, unless the unit is rent-controlled.

If you’re still confused, this online rent or buy calculator might be of help. The site offers two calculators – basic and advanced – which enable people to quickly decide if it is likely to make more sense to rent or purchase a home. The Basic calculator shows how much home you can afford to buy while paying a monthly payment equivalent to your current rental payment. This is used if you plan to live in the home for an extended period of time and have no intent to sell it anytime soon. Meanwhile, the advanced calculator gives a more precise scenario, as it has more features which can be used to compare the longer term impact of inflation, real estate appreciation and real estate transaction costs. This tool is best used if you are likely to sell the home in a few years.

Both calculators are so easy to use and understand because every financial term is clearly explained and defined. You’ll find it very handy whenever and wherever you are.

Which option is better for you isn’t just about money. You also have to consider comfort and your vision for your life. Always bear in mind that, owning doesn’t always make more sense and renting is not always a way to save.

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