Renting Versus Buying a Home

Apr 15, 2010
Elizabeth Rose

: Renting versus Buying a Home is a Tough Decision - Flickr.com, Erix!

The decision whether to rent or buy a home is a difficult one for many individuals. Many factors can determine the final choice.

Renting versus buying a home is a decision most have to make at some point during their life time. Many more factors than the initial outset cost can weigh in, both positively and negatively. The importance placed on any component varies widely from person to person.

Benefits of Renting a Home

Generally accepted benefits of renting a home include a much cheaper monthly rent payment than a mortgage payment, shorter-term lease options, and not having to worry about making repairs to the home or appliances. Typically, in order to rent a home, a prospective renter must sign a lease, or contract in which the renter and land lord agree on certain ground rules, including when rent payment is due and whether pets are allowed. In order to move into a rental home, usually the first month's rent and a security deposit is required. The security deposit is often the same price as a month's rent.

Renting a home usually includes a one-year lease, meaning a person has signed a contract in which he or she agrees to remain in the home and pay rent for a specified amount of time, usually one year. Some leases are for an even shorter length of time. Once the lease is up, provided the renter does not sign a new lease, she or he is free to move to another home.

Typically, in rental situations, the renter does not have to make repairs to the home or major appliances and is not expected to pay for them. If something breaks, whether a dishwasher or a window, the land lord will take care of it. One caveat renters often face, however, is that repairs may not be done as soon as one might want them to be done. Sometimes the renter has to wait a week or more for repairs, depending upon what is broken.

Benefits of Buying a Home

Pride of ownership, appreciating value, and the stability of regular monthly payments (provided a traditional 15 or 30 year mortgage is obtained) are some of the things which drive many to buy a home. Not only does the home owner own the home, but he or she can do whatever they wish in the home, from repainting to gutting the kitchen to growing a garden outside, if an outdoor area is included with the home.

Though recently the housing market has been sour, causing home values to go down in many areas, many annalists believe home values will be on the rise again within the next few years. Lower values now may be an enticing factor for those considering purchasing a home, as monthly mortgage payments would be lower than what they may have been even a few years ago. Lower values create opportunities to own a home to those who may not have been able to afford it previously.

Regular mortgage payments, provided they are affordable, can provide financial stability for home owners who may have experienced issues with rent prices rising unexpectedly in the past. Home equity can give home owners peace of mind in times of stock market crisis.

Renting Versus Buying a Home

While renting or buying a home may both have separate benefits, it is important to compare benefits and negatives of both in order to make an informed decision.

While renting a home provides a cheaper housing payment every month compared to buying, long-term renters can attest to the fact that the monthly rent payment can go up from time to time. If a home owner has a traditional loan, the home owner's monthly mortgage payment will not go up in price.

Applying for a mortgage includes a lot of paperwork. Prospective buyers must pay close, careful attention to every detail of the mortgage contract, as most mortgages are for 30 years. If not fully understood when signed, a 30 year mortgage can become a 30 year headache. One reason for defaulting on a mortgage is the mortgage holder did not fully understand the contract and did not realize, for example, that the monthly mortgage payment may go up at some point. A rental lease is typically less than five pages long and includes easy to understand, clear-cut terms.

Home equity has been hawked as the ultimate reason to buy a home. Home prices rose year over year for over 20 years before the housing bubble burst. Real estate values may not be going up over the next few years and probably will not escalate the way they did in the recent past, but home values will rise again, albeit at a much slower pace. Renting provides no equity. When a renter moves, she or he may get the security deposit back but will not have accumulated any extra value in the home they are leaving.

Renting versus buying is a question many are pondering at the present. There are several legitimate reasons to rent a home, just as there are several valid reasons to own a home. The final decision is up to each individual.