Rent or Buy? Choosing whether to buy or Rent a home could be one of the most important decisions you make in your life. Are you ready to settle down? Will one price work out better than the other?
Buying your own home can be expensive but could save you money over the years. Renting offers less freedom to live by your own rules but more flexibility if you need to move. Here are the benefits of each and how to decide whether to rent or buy.
Whether you rent or buy depends on your financial situation, like how you’d like to manage your savings, if you have an emergency fund, and whether you’d rather try to fix your broken toilet yourself or just complain to your superintendent.
It’s also a decision that’s harder and harder to make for young people, as financial inequality leads more young people to simply live with their parents, and to put off buying a home until later in their lives.
Should you buy a home?
The benefits of buying
Your monthly repayments go towards buying your home, not into a landlord’s pocket
You fully own your home at the end of the mortgage’s term, and can then live rent free
You could make a profit if house prices rise
You can live by your own rules without needing a landlord’s permission (e.g. having pets)
You can make changes to the property such as redecorating or landscaping the garden
Renovations and changes you make could increase your home’s value
No landlord who could make you move house because they want to sell
Buying can sometimes be cheaper than renting
The drawbacks of buying
- Upfront costs like mortgage fees and stamp duty can make it pricier than renting
- If you get a joint mortgage and separate, it can be complicated to sell the property
- Interest rate rises can increase your monthly payments (unless you get a fixed rate)
- You have to pay for repairs, including if something urgent goes wrong like a leak
- Moving can take a long time because you have to sell your home first
- If your finances become tighter, moving to a cheaper property can take a long time
- There are financial consequences if you fall behind on repayments, like getting into debt
- If you fell too far behind you could face bankruptcy or your home being repossessed
Should you rent a home?
The benefits of renting
It can be easier to move house quickly when you need to
Finding and renting a home is usually quicker than the process of buying
No risk of losing money if the property’s price goes down
Your landlord has to pay for repairs and renovations
It is often cheaper and rental payments rarely change, making it easier to budget
You may be able to rent a bigger home in a nicer area than you could afford to buy
The drawbacks of renting
- All of your rent payments go to your landlord, not towards owning a home
- If you never buy a house you have to pay rent for your whole life, even after you retire
- If your landlord decides to sell or get new tenants, you have to move out
- Your landlord can set rules and restrict changes you can make to the property
- You have to pay a deposit, and the landlord may keep some or all of it
- Your landlord could decide to increase your rent
- Improving the property could increase its price, but this only benefits the landlord
Which is cheaper?
It is usually cheaper to rent in the short term because:
- The rent you pay could be lower than mortgage repayments would cost
- The deposit you pay is usually much less than the initial costs of buying a home