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Buy vs. Rent – Which is better for you?

Design of modern home kitchen in the attic and rustic style. Bla

Buy vs. Rent – Which is better for you?

By: Mike DeKuiper

One of the greatest parts of the American Dream is being a homeowner, but it isn’t right for everybody. Homeownership has great potential for the right people, and at other times it makes more sense to rent. If you are wondering which option is best for you, here are some pro’s and con’s of each.

Renting: When you are renting a home, apartment, condo, etc., one of the biggest benefits is that you don’t have to worry about maintenance and upkeep. Homeownership does come at the cost of upkeep, some of which can be very expensive. The average life of an asphalt roof is 20-25 years, with metal roofs lasting longer but also costing more. The average life of a water heater is 8-12 years, and the average life of a furnace is 15-20 years. If you live in an area where an air conditioner is a must, that average life is 15-20 years as well.

To keep these items running well, it is always recommended to have them service, replace air filters on furnaces, and just generally keep them maintained. When you are renting a home, that isn’t the case as more often than not, it is the responsibility of the owner of the property to keep all of this maintained.

When you rent a home, because the maintenance is done by the property owner, or a property management company, you have more time to focus on what you want to do, rather than what needs to be done. On the other hand, when you are renting a place to live, since you have no ownership, you don’t have the ability to make the upgrades you would like, you don’t have the ability to personalize it beyond what the property manager allows, and you aren’t gaining equity. Since the cost of everything is always going up due to inflation, the cost of rent will follow as well.

Buying: Everything I had mentioned in the renting portion for maintenance and upkeep may seem very daunting to some people, but one of the biggest benefits to owning a home is the fact that you are often gaining equity. For the same reason as mentioned above, the cost of everything is going up, so the amount your house is worth is also going up. There is a huge point to be made in regards to buying a house, when the cost of everything else is going up, and that is when you are in a fixed rate mortgage, the only things that can change your payment are your taxes and your insurance. Unfortunately, I have never seen taxes go down in an area, however, there are limits on how much your property taxes can rise every year. You can, however, shop around for a different insurance company to see if you can receive a competitive rate.

Another benefit of owning a home is that it is yours to do what you want with. Don’t like the current paint in your bathroom? Change it. Backsplash in the kitchen is outdated? Change it. 70’s shag carpet in the living room? Replace it! There are so many videos on YouTube that can show you how to do it yourself, and you don’t have to be a Chip and Joana to do so. If you aren’t feeling up to the challenge, you can always hire a contractor to do the work for you.

I understand that all of these upgrades do require a fee, which is why you want to be sure that when you are purchasing a home, you feel comfortable with the monthly payment you have. I had also previously mentioned how you are going to be gaining equity in your home. Throughout 2021, we consistently saw the value of homes going up sometimes over 18% compared to 2020. That means if you purchased a home in 2020 that was worth $200,000, it was likely worth at least $236,000 in 2021 at certain times, and we continued to see it rise. Many researchers are saying we will start to see that slow down to around 8% compared to 18%, but that means you have the ability to grow your wealth simply by living in a place with a roof over your head.

You can also tap into this equity in your home by doing a cash out refinance or getting a home equity line of credit if you have the need to make some of these bigger repairs, but don’t have the capital on hand. The average price of a kitchen renovation in 2021 was over $30,000, and as much as I wish I had that kind of cash on hand, I just don’t. This is where you can borrow money from the increased value of your home to complete those projects.

The final point that most people don’t think about when they are buying a home is that when you buy a home, that is the best way to fight inflation within your household. This may seem absolutely absurd at first, that you can fight inflation, but inflation is going to happen no matter what. The difference is that when you own a home, you have a fixed payment on your house. Yes, the taxes may go up and the insurance may go up, but your housing payment is fixed for the life of the loan unless you choose to refinance. So as many other people are struggling with rising prices of rent, you have the peace of mind that you can continue to afford your home at the set rate and price agreed upon closing your mortgage.

There are many benefits to renting and buying, and only you can determine what is best for you. When you talk with mortgage professionals here at Stockton Mortgage about homeownership, we can help you work through the process and help you decide which is the best option for you. There is a reason that we love what we do, and that is the fact we absolutely love seeing people happy and helping them grow their wealth. Contact us today to learn more!

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