Renting Vs. Buying: An Analysis

buying and rentingBecoming a homeowner is a major responsibility, so there is a lot to consider before diving into this commitment. One of the most prevalent aspects of this jump that you’ll need to think about is the difference between renting and buying. If you have been going back and forth between the two options, you surely know that there is a lot to consider. This is an especially relevant topic for those living in North Texas, where home and rent prices have skyrocketed. Many find their monthly rents approaching the same levels as their friends or family’s mortgage payments. With this in mind, it is important to look at the advantages and disadvantages of each to better determine what is best for you and your future. In today’s blog, Family Home Loan Texas discusses the advantages and disadvantages of renting and buying.

Pros And Cons Of Renting

Historically, many people choose to rent because of the flexibility it provides as well as its relative cost savings. When you rent, you typically only sign a year-long lease, if not month-to-month, so you have the ability to move frequently if you so desire. This allows for you to move should you find a new job or if your overall priorities shift. Moreover, you are not responsible for repairs; because you do not own the property, the landlord or management company will organize, schedule, and pay for anything that needs to be done. This makes for a simple home life, where your responsibilities consist of just paying your rent and utilities. In some cases, you have lower up-front costs as well; you can typically expect just to pay an application fee and a security deposit — this is significantly less than what you would expect to pay with a down payment and closing costs you find when purchasing a house. Overall, you do not have many costs to pay when you are renting.

Unfortunately, when you pay rent, you are not building any equity; all of your payments are going to the property’s owner, so your money is growing their equity. The sting of this is even worse when you consider that rent payments are quite close to many mortgage payments, so when you could be putting that towards your own home, you are giving that to someone else. Using tools like our Rent vs. Buy Calculator can show you how quickly you’d break even when comparing a mortgage (including your down payment) to rent payments. In many cases, the results can be eye-opening.

As flexible as renting can be, there is also a lot of insecurity. Your landlord can sell the property at any time or decide to renovate, which means you have to leave. This makes it difficult to truly settle down when you are renting. Similarly, you also have limited decorating and customization options. Sure, you can hang up art and make small nail holes, but if you do anything more substantial you will be on the hook for repairs when you move out. Plus, you can forget about moving any walls or altering anything major. Even if you can, you would still be putting your own money towards increasing the value of someone else’s property. 

Additionally, even applying for rentals has gotten more complicated. In some places, you have to prove you make over three times what the rent is, which is exorbitant — if people had that sort o money to spend on rent, would likely be looking at houses to buy. Applications also require everyone living in the residence to meet certain income thresholds, which is just unnecessary — if the monthly payments can always be met, why does this matter? And this doesn’t even account for the shocking rent increases that any tenant is subjected to when it is time tto renew their lease. Overall, renting does provide flexibility, but its benefits are dwindling more and more each day. 

Pros And Cons Of Buying

When you own a home, you can rest easy knowing that you have stability. You are not at the whim of a landlord to decide how long you can live in your home. Rather, you can live there for as long as you like; it can be the home you want to stay in for the rest of your life or, if property prices rise enough, you can sell it for a significant profit. After all, your monthly mortgage payments — as opposed to rental payments — build up equity in your house rather than benefiting someone else. 

With renting you have to be wary of rent increases, but when you have a fixed-rate mortgage on your home, you will know exactly how much you are paying year after year. Moreover, if national interest rates decrease, you can always refinance your loan to pay less interest. Because the home is yours, you can navigate any situation exactly how you see fit. This includes renovations and repairs; if you decide you don’t want that wall between your kitchen and dining room, you can knock it down and create the space you’ve always dreamed of.

On the flip side, you are also responsible for all the costs. You cannot call a landlord to fix a leaky pipe; you are on the hook for finding a repairman and paying them. It should be noted that any fixes you are responsible for will likely increase the overall value of your house because you will be putting in newer replacements for whatever you are fixing. 

You also lose some of the flexibility you have when renting. If you get a fantastic job offer in another city, you can’t just pick up and move. You will have to deal with putting your house on the market and selling it. This is significantly more work than just not renewing your lease.

Overall, there’s no right or wrong answer if you are wondering if you should rent or buy. Everyone has different needs — both financially and for their lifestyles. If you value flexibility and being able to pack up and go, renting might be the best option. However, if you have the means to cover the down payment and foresee yourself staying put for a while, buying a home is a better option and will likely net you a significant profit should you move. It should be noted that given how much rent prices are going up, especially in north texas, the savings typically associated with renting are lessening rapidly.

Contact Us For Help Deciding If You Should Rent Or Buy

We know the decision to buy a house is a big one, but we can help you through every step along the way. Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about your home loan needs, including conventional mortgages and refinancing.