Renting Versus Buying a New Home: The Pros & Cons

How do you know when you are ready to own a home, and that ownership versus renting is the right choice? Factors such as finances, relationship status, lifestyle, employment, and desired location all play heavily into the decision. People often both rent and own over the course of their lives, and at times the choice is clear. The serious commitment of buying a home, however, makes weighing the pros and cons of both options a necessary place to start.

The Pros of Buying a Home

Building your own equity instead of your landlord’s

Buying a home is an investment. While it costs you money to make house payments, every time you do, a portion of the payment builds equity. Over time, as your home appreciates and your mortgage goes down, that value increases. You can use that equity to make improvements to your home, afford a bigger home, or just let it grow to use for future expenses such as college or retirement.

Making your home your own

Owning a home gives you the freedom to paint, decorate or remodel however you like and truly make it your own.

No rent increases

With a fixed-rate mortgage your payments stay the same over the life of the loan, which guarantees no surprise price hikes.

The Pros of Renting a Home

Maintenance is covered

Other than keeping the property clean and reasonably maintained, repairs and larger maintenance items are the landlord’s responsibility. When something breaks, you don’t have to pay for it, though this comes at the cost of working within the landlord’s timeline.

No property taxes

The property owner is responsible for paying property taxes.

Moving on is easier

One of the biggest pros of renting is the short-term commitment. If you are unsure where your job might take you, or haven’t decided where you want to settle down, renting offers the freedom to move without the obligations of owning or the hassles of selling a home.

The Cons of Buying a Home

Coming up with the down payment

In order to secure a mortgage, home buyers need to pay a percentage of the loan up front. The amount varies depending upon the mortgage company and current market conditions. The down payment is a way showing that you can afford the home. The larger the down payment, the smaller your mortgage payments will be, and the the greater your equity will be, as well. There are different loan programs available to help with down payments; having a firm down payment in place establishes you on stable financial footing.

The cost to sell

Unlike walking away from a rental property at the end of a lease term, when you no longer want or need a home you’ve purchased there will be costs associated with selling it. Preparing a house for sale takes planning, time, and money. Getting the most out of your home investment will require making all necessary maintenance and repairs, as well as cleaning and attractively staging the home for prospective buyers. Realtor fees, which amount to a percentage of the selling price, can take a chunk out of your profit as well.

Maintenance is your responsibility

All of the systems in your home–heating and air conditioning, hot water and plumbing, as well as all the appliances are your responsibility to maintain and repair. However, you also have the choice of who and when to call for service, when to replace equipment and what new equipment to buy.

Taxes

As the homeowner, property taxes are your responsibility and are typically calculated into your mortgage payment.

The Cons of Renting

Increasing rents 

In the Denver area, rents are currently at an all-time high, making it difficult to even afford a rental home, Rent can go up every time the lease expires, adding an element of uncertainty to your finances. If the rent goes up more than you can afford, you’ll be forced to find another place to live. Moving–especially when it is not your choice–is disruptive and expensive.

No equity

While you are making your rent payments, the homeowner (not you) is earning equity. When you leave the property, you have no value to show for all the payments you made.

Long-term rental uncertainty

Once your lease expires, the landlord is not obligated to extend it. He or she may choose to sell the property, move into it, or simply rent it to someone else, leaving you to find and move into another home on short notice.

Examining the pros and cons of renting and buying makes it easier to determine which option is best for you, based on your current situation and plans for the future. If you don’t know where your career is taking you, if your finances aren’t as stable as you’d like yet, or if you’re simply not ready to commit to the responsibility of owning a home, renting is likely the best option. However, if your career is on a solid track, you have a reliable source of steady income and savings, and you know where you want to live for the foreseeable future, then buying a home is a smart investment.

When you are ready for a home you can truly make your own, Sheffield Homes is here to make your home ownership dreams come true! Contact us today to learn more about building a home in the Denver Metro Area or Northern Colorado.