There are advantages and disadvantages of buying a home or choosing to rent. One option may be better than the other depending on personal finances, preferences, and current market conditions. It’s up to the individual to decide the best housing option to meet their needs and the level of responsibility they’re willing to take on.

There are benefits to homeownership like building equity. But there are also disadvantages to owning a home like maintenance and repair costs. Renters don’t have to worry about paying for expensive home repairs or property taxes, but they don’t have the freedom to renovate or make major changes to the home either.

 So, is it better to rent or buy? Discover the pros and cons of renting vs buying and decide which of these options is best for you now and in the future. 

Buying Pros and Cons

Buying Pro: Homeowners Can Build Equity

Buying a home can be a long-term investment that earns equity for homeowners. Equity is the difference between the market value of a home and the amount still owed on the mortgage loan.

Paying down the principal over time increases home equity, so long as the market value of the home remains greater than what’s owed on the home. Homeowners can use home equity and use it as a line of credit for loans.

Buying Pro: Homeowners Don’t Have Landlords

Having a difficult landlord is enough to make someone wish they owned their own home. Without a landlord, homeowners don’t need to worry about someone increasing their rent or not having the option to renew.

Homeowners can also make updates to their home before problems arise like leaky old pipes and make upgrades to make the living space more comfortable like installing ceiling fans and locking screen doors. For those with dogs and cats, owning a home can be beneficial for pet owners, with fewer or no restrictions.

Buying Pro: Homeowners Can Customize Their Home

Staring at white walls in a basic apartment can get old. For those who have rented for many years, the benefit of being able to personalize a space can be a refreshing change. Buying a home opens up the opportunity to renovate and redecorate, adding personalized touches to your home.

Homeowners have the freedom to make changes like upgrading light fixtures, building a deck for outdoor eating space, and renovating a kitchen to make it more functional.

 Ready to find your first home? Get ready to buy: First‑Time Home Buying in 6 Steps

Buying Con: Homeowners Pay Property Tax

This expense is not familiar to renters, but the government depends on property tax revenue to serve communities. Money collected for property taxes funds essential government services like public education, road and infrastructure maintenance, and emergency services. The amount a homeowner pays in property taxes depends on multiple factors, with assessed property value being the biggest.

Other factors include local tax rates, exemptions and deductions, and economic conditions. As home prices increase, so does the home value, and along with it, the amount of property tax owed.

Buying Con: The Cost of Home Maintenance and Repairs

A downside to buying a home compared to renting is the financial responsibility of taking on inevitable home maintenance and repairs as they come up. Renters are shielded from the burden of homeowner expenses like an enormous plumbing bill or the cost to replace the roof.

Homeowners must be financially prepared and ready to take on home maintenance and repair costs that should not be ignored. Deferring problems can lead to even greater costs and damage down the road.

Buying Con: The High Cost of Purchasing a Home

Paying the mortgage down payment when buying a home is a large cost that can be seen as a disadvantage compared to renting. The minimum mortgage down payment is typically 3% or more of the home cost.

There may also be other associated costs when moving into a new home. Even turnkey homes that are move-in ready may come with unexpected expenses as homebuyers settle in. These costs on top of the down payment can really add up in the first year of homeownership.

Buying Con: Home Values Change with the Market

Not all property values of homes increase the way homeowners would like them to. Fluctuations in the housing market can lead to a decrease in equity, and in worse cases, negative equity, when the homeowner owes more on their mortgage loan than the market value of the home.

Most importantly, homeowners want their home to be of greater value than they’ve paid for their mortgage loan at the time they decide to sell the home.

 Have questions about mortgage loans? Your local Mortgage Advisor is happy to answer them.

Buying Con: Buying a Home is a Serious Commitment

Making an offer and signing the paperwork to buy a home is a big commitment, especially compared to signing a lease to rent. Instead of the one-year commitment most renters have, homebuyers are typically signing up for a 30-year mortgage. There are major considerations to take into account when making the decision to commit to living in the same place long term.

It’s important for potential homebuyers to consider major life impacts like commute time, distance to the nearest grocery stores and the local cost of living that they’ll be experiencing for years to come.

Renting Pros and Cons

Renting Pro: Renters Have the Freedom to Move

People who are renting their home have more freedom to move than homeowners. Typically, a tenant will sign a one-year lease, and when it expires they may choose to renew the lease or move to a new home. It’s beneficial to have this freedom when life changes occur, like finding a bigger home after adding a new member to the family, or being able to move closer to work after getting a new job that’s further away.

New homeowners are especially at a disadvantage to selling their home, after investing their savings into a down payment and closing costs on a home. It also takes time to put a home on the market and close escrow, during which time a homeowner could lose money in the process.

Renting Pro: A Security Deposit is Cheaper Than a Down Payment

The lower upfront cost of renting vs buying is an advantage for tenants. When tenants move into a new home they pay a security deposit that’s typically an amount equal to one month’s rent.

This money is used by the property management company or landlord, per the lease agreement, to maintain the home and repair any damages that go beyond the usual wear and tear. The amount of money for a security deposit is much lower in comparison to a down payment on a home that a homeowner will face at the time of buying a home.

Renting Pro: The Landlord Handles Home Maintenance and Repairs

Not being responsible for home maintenance and repairs is a huge benefit for tenants. Sparing these expenses provides those who choose to rent with a consistent, stable housing cost month-over-month that they can budget for.

For homeowners, the cost of major home maintenance and repairs can come at unexpected times. Tenants don’t have to worry about purchasing a new hot water furnace or replacing an HVAC system on short notice.

Personal loans can help homeowners take care of emergency home expenses.

Renting Pro: Pools and Other Amenities for Tenants

Another perk of renting a home is that the housing complex may have amenities including a pool, hot tub, barbeque or security. Condominium and apartment home communities may provide amenities like these to enjoy with a small maintenance cost worked into the monthly rent.

For homeowners, the cost for a lot big enough for a pool and regular maintenance would be much more expensive for an individual or family. Some other amenities that luxury apartments and housing complex offer are just not realistic for homeowners.

Renting Con: Tenants Don’t Build Equity While Renting

As the market value of the home increases, homeowners benefit from increased equity. Homeowners can then use their home’s equity as a line of credit to make another purchase. Tenants do not benefit from earning equity on the monthly cost of rent. Rent is a big expense, and it does not offer a return on investment.

Renting Con: Renters Have Limits to Personalizing Their Space

It’s common for people to want to add touches to make their home feel like theirs, in which case renters are at a disadvantage when it comes to personalizing their home.

While renters can move in all of their personal belongings and hang their favorite art pieces, most lease agreements have limits on how tenants can personalize the home, like changing light fixtures and appliances, and performing renovations.

Renting Con: The Landlord Controls the Lease

When renting, the landlord or property manager controls the lease agreement to the home. Both the landlord and the tenant are held responsible for honoring the agreement and face penalties if the agreement is broken.

However, after the term of the lease expires the landlord can change the agreement. For the tenant this could mean an increase in rent when a new leasing term begins, or if the property owner decides to sell the home, they could remove the option to renew the lease.

 Need a mortgage loan? You’ve got options. Don’t put off learning about United Federal Credit Union mortgage loan options.

Bottom Line

There are a lot of factors that go into making the decision to rent versus buy. The best choice depends on a variety of factors.

If you are ready to buy a home, you can check out United Federal Credit Union’s mortgage loan options.