Are you weighing the advantages and disadvantages of owning your own home?
Perhaps you’re new to the property market and looking for some guidance. There are clear-cut benefits to both renting and buying, but which is right for you? Let’s take a look at renting vs buying, including the definition of both and which one you should opt for.
A Bit About Renting vs Buying
We all throw around the terms renting and buying with some regular frequency. But have you ever actually given thought to their meanings? Let's take a look at the difference between the two modes of living in a property.
What is Renting?
The definition of renting means that you’ll never become the owner of a property. Instead, you pay an agreed monthly fee to an estate agent or person (depending on how the property is maintained) in return for living in the house/apartment. There are different circumstances when renting and different companies might have rules to abide by. For example, not every place allows pets, smokers, or people who don’t work. It is your responsibility to respect these rules and sign a legal contract to agree to this.
Depending on your landlord, they might include utility costs in the rent. This will be explained to you when you first show an interest in the property. Many contracts differ in how long you can rent for. Typically, you’ll sign a 12-month contract, but some individuals offer three months, six months, or eighteen months. As you will never become the owner of the property, you’re responsible for keeping the property in the exact condition you moved into. That means if you make any accidental damage, you’ll have to repair them using your own money.
What is Buying?
The difference between renting vs buying is essentially how many rights you have to the property. When you buy a house/apartment, you become the owner. That means you can adjust the interior of the property according to your preferences. Aside from certain restrictions, you can even alter the exterior and land of the property.
Buying a home isn’t a quick and easy process, though there are many reasons why people do so (more on this later). The first step is to scour the Internet for a property which is suitable for you and in an appropriate location. Next, you’ll need to be quick to contact the seller and put in an offer for the property. Bear in mind others might have put in an offer too. This will affect the process and you may need to increase your budget if there’s competition. If you are successful, you’ll need to acquire the funds to cover the cost of the property and hidden fees. This can be through personal savings or more often, loans.
Advantages and Disadvantages of Renting vs Buying
Now that you know the definition of renting vs buying, how do you decide which one is suitable for your budget and needs? We've broken down below the benefits and drawbacks of renting vs buying to assist in your search.
What are The Benefits of Renting?
There are plenty of benefits to renting, even though you’ll never own the property. Unlike the process with buying, it’s a quicker process and you can usually move into your new home almost immediately. Once you’ve found the property you like, enquire to the estate agent and arrange a viewing. Aside from a deposit (usually the same amount as your monthly rent), you don’t need a huge sum of money upfront. This is especially great if you are new to the employment ladder.
Additionally, professionally managed properties handle the maintenance for you. Therefore, if there’s a fault with the property, you don’t need to worry about it. Due to the quick process and short leases, you can move after the agreed time if you’re not happy in your location. Consequently, there’s much more flexibility involved in renting. If you wish to move to another area of your country, it’s quicker and easier than buying.
What are The Benefits of Buying?
When considering renting vs buying, the latter ensures that your money is going towards an investment. Instead of spending hundreds of dollars every month which you’ll never see again, buying means you’re putting your money towards your future. Houses typically increase in value, so if you spend $300,00 on a house, you might make an additional $100,000 in two years by doing nothing. Unlike renting where the price market can fluctuate, your costs are predictable and more stable.
There’s also a huge sense of pride in owning your own home. You get the opportunity to decorate and style it to your own tastes. If you don’t like the bathroom, you can alter it – without asking anyone’s permission. In addition, buying a house is more stable than renting – especially if you have children living with you. When you rent, the owner can decide to sell at the end of the contract, meaning you’re on the streets. On the other hand, no-one can throw you out of your own home if you pay your mortgage.
What are The Disadvantages of Renting?
The main disadvantage of renting is that you’re essentially throwing money away. Aside from having a property to borrow, you’re not investing your money. Instead of it sitting in a pot for your future, you don’t have anything to show for it after forking out for years. Throughout your contract, you’re bound to the lease agreement. This can impact your freedom to renovate the property. If you don’t like the kitchen tiles, there’s little you can do about it. You can’t make changes to the property without consulting the owner first.
Renting isn’t stable and doesn’t guarantee a future in that property. Like we touched on earlier, your landlord could decide to sell the property and leave you without a roof over your head. Alternatively, your landlord might decide to increase the monthly charge without you having a say. In fact, the renting market fluctuates all the time, and there’s been a huge increase in the monthly renting fee in recent years.
What are The Disadvantages of Buying?
When thinking of renting vs buying, there are disadvantages to both. If you’re considering buying a property, there are a few negatives to think about first. Unlike renting, owning a house is a long-term financial commitment which you can’t get out of easily. Unless you sell the property or pay off the remaining money, you cannot move unless you have additional money to purchase a separate property.
As well as payments, you’re responsible for all maintenance on your home. This can be unexpected and expensive. For example, a broken toilet can be an awkward, costly repair you might not have prepared for.
When firstly considering buying a home, you’ll need a large deposit – usually around 20 percent of the property’s worth. This can be a long process, which is even impossible for some whilst living their life. In addition, there are numerous fees to consider when purchasing so you’ll need extra financial support for these too.
Renting vs Buying: How do You Determine Which is Right for You?
When considering renting vs buying, everyone’s goals and lifestyles are different. There are advantages and disadvantages to both which will help with your decision. Renting is a flexible option for people who are young and have just moved out of their house. Rather than jumping straight into a long-term financial agreement, it’s more sensible to see how you manage monthly payments first. Renting is also a good decision if you’re unsure of where you see your future. Perhaps you don’t have a vision for your life and career, which is perfectly okay. As a result, we suggest renting to not commit yourself to anything which could affect your future.
On the other hand, buying is a good option if you’re comfortable in your relationship and perhaps have children. There’s a lot more stability in buying as no-one can throw you out if you meet your monthly payments. If your children are at school, you don’t want to risk moving out to a new location. Buying is also a suitable option if you have a large sum of money to act as a deposit. However, be sure to consider any maintenance costs that may arise.
What Advice Do You Have on Renting vs Buying?
We hope you enjoyed our brief analysis of the difference between these two platforms. When considering your next property move, think carefully about how comfortable you are with your current situation.
Do you have any advice or knowledge we haven’t mentioned above? If so, let us know in the comments to keep this conversation going.
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