Professionals Richmond Have you thought about entering the housing market or have been in the housing market for some time and still not sure whether you should be renting or buying. There are pros and cons for both types of living and are worth discussing before taking the step as it may have longer term effect.
The Positives of Renting
No big outlay of money:
Obviously, renting a home will not require a big outlay of cash like buying can. Although you are required to pay a bond (usually 6 weeks rent) when first moving in to a rental, compared with a house deposit, taxes and a mortgage, you could say renters get off easier.
Less monthly cost:
Renting means that you are not responsible for continuing costs of owning a home, such as repairs and maintenance, taxes, insurances and any additional costs that may arise. As a renter however you will be responsible for any damages that you make to the property as well as utilities, water and some other services, however these are generally foreseeable and a much smaller cost than those associated with buying.
Ideal location/ Short Term Commitments:
As a renter, you can move to your ideal location for the lifestyle or the convenience to work etc. Purchasing a home in your ideal location may be a much more costly exercise. Your ideal location may also change depending on your stage of life, so as a renter you can live in the heart of the social scene while you are younger and move to more quiet location when you’re older. As you are not locked into any significant long term commitments, moving at will is a possibility. You can negotiate the length of the rental lease, and once that time period expires you have the option of moving or re-negotiating a new lease. With a home ownership you always have the costs associated with selling it if you decide to. The housing market at that time would dictate both your costs and your selling price.
Financial security:
You know what your costs are going to be each month and it is much easier to budget compared to a home owner. The costs of home ownership fluctuate. Taxes and maintenance costs go up, whereas rent is usually only increased when a new lease is negotiated.
The Negatives of Renting
You are paying each month for something that will never belong to you. At least when you are paying a mortgage you own the property and provided you keep in good standing with the payments someday the home will be entirely yours mortgage free. When renting you are only ever paying for a service and like most services, you will never see that money again.
The economy is forever changing, and the trend seems to be going towards the fact that renters are on par financially with home owners in the long term. This has some mitigating factors to it however, such as other investments.
Renting comes with restrictions:
When renting a property it usually comes with a lot of restrictions. You can’t make any significant changes to the structure of the dwelling, and you may even have limitations when it comes to painting and any décor that would change the home from its existing condition. Often renters are not allowed to install components like ceiling fans or air conditioning, or even beef up the security of the home. Pets or smoking may not be allowed.
The long term negatives of renting:
If your intention is to rent long term which could take you into your retirement years, then you have to be sure that you will have enough income to afford the rent. For many who purchased their home it has been paid off and they no longer have mortgage costs to deal with on a fixed income. Depending on the circumstances and what other investments have been made, renting may be the best option, but if income has been reduced it could mean having to compromise on some property attributes, such as location or size.
The Positives of Buying
Ownership:
Eventually the property will become yours once it is paid in full and it will not become a cost that you need to consider in your retirement years. You will have built up equity in the home should you decide to sell it, and you could downsize and have some extra attainable cash.
Your personal touch:
Your home is purchased to do as you please with in regards to renovating, updating or decorating it. You have the option of making changes to the home if you are outgrowing it.
You are secure:
You have much more security with home ownership than you do with renting. Something unforeseen could arise where you are asked to vacate your rental property legally. This is not an issue with your home ownership. You make the decisions of what takes place in your home or who lives there. If you want to have pets or allowing smoking, that’s your choice.
The Negatives of Home Buying
You are faced with a substantial start-up cost that includes the down payment and the closing costs. You also may be paying an overall large amount of money over the life of your mortgage that could be avoided with a larger deposit etc.
The maintenance and upkeep:
As the home owner you don’t have a landlord to turn to when the home is in need of repair or the air conditioner breaks in the middle of summer. It is your responsibility to get it done and pay for it, which can catch a lot of home owners out when cash is short.
No guarantees on return on investment:
As a home owner, there is no guarantee you will make money when you sell your home in the future. Many factors play a role in determining how much your home has increased in value and selling fees can be high.
The choice of renting or buying is yours, and although the latest news article might tell you one way is better than the other. It is important to way up the most important things to you whether that be costs, quality of life, flexibility or long term investment.
So happy house hunting, regardless of what you choose!