Pros and cons of buying and renting a home
There are pros and cons to renting a property, just as there to owning a home. Both options have their own advantages and disadvantages, for example renting allows you more expendable money in the short term, while owning a house gives one the sense of security as it is considered a long-term investment. Let’s look at all the pros and cons to help you make a well-informed decision of what will suit you, right now.
Advantages of buying a home
– Owning a home offers the long-term benefits of security, equity and potential growth in personal wealth
– The value of a home will appreciate over time and if you decide to sell, you can earn a profit off the sale.
– When you buy a house it becomes your legal property, which allows you greater freedom in its use without restrictions often enforced by a Landlord.
– Being a Homeowner allows you creative control of your property. You can alter the property, including décor changes, landscaping and renovations, to suit your needs and your style.
– You have the option of buying to rent which enables a Homeowner to generate income from renting out the property. This income can be put towards the home loan.
– Being a Homeowner who ensures repayments are made on time can improve your credit profile. Not only will you have a large investment to your name, but paying your monthly bond repayments on time increases your credit score.
– You have the option to refinance your bond amount should you wish to withdraw a large amount of money to pay for major purchases.
– There is an opportunity to save money in the long term as there are possible tax deductions related to income-generating properties.
Disadvantages of buying a home
– Being a Homeowner comes with huge financial responsibility including bond repayments and regular house maintenance.
– There are additional costs to homeownership and these usually include rates, taxes, insurance, and maintenance for which the Homeowner is responsible.
– A Homeowner runs the risk of not making any profit through resale. This is often caused by economic factors such as a recession or high interest rates, or simply through a particular location becoming less desirable.
– A Homeowner has less mobility when it comes to being able to move home than a Tenant who rents on a short-term basis. A Tenant can leave a property after fulfilling the notice period, which is usually one month. However, a Homeowner is likely to be dependent on selling their home before being able to buy a new one, and therefore it might take longer to be able to move homes once the decision has been made to do so.
Advantages of renting a home
– Renting a property allows more flexibility than owning a home. This is ideal for those who could be faced with sudden changes such as a job relocation. Renting requires no long-term commitment from a Tenant, and is the best option if you don’t intend on staying in one place for a long time.
– As a Tenant, there is the possibility of living in an area in which you could not afford to buy.
– Moving out is easier for a Tenant than a Homeowner as there is no stress of finding someone to take over the lease, or finding a Buyer to purchase the property as this is the responsibility of the Homeowner or Landlord.
– The only insurance required by a Tenant will be to cover the contents of the home, while all maintenance work on the property is for the Homeowner’s account, as is homeowners insurance.
– After paying rent, a Tenant may have additional money which they can use to invest elsewhere, whether it is saving towards buying a house or investing in the stock market, and need not worry about putting additional funds into a home loan.
Disadvantages of renting a home
– A Tenant is bound by the rules of the lease agreement, which can impact the freedom to use or renovate the property.
– You cannot make changes to a rented property without the consent of the Homeowner.
– When renting, you will often have to deal with a Rental Agent who will then be the liaison between you and the Homeowner. This can result in issues taking longer to resolve since there is a 3rd party involved.
– Renting offers no wealth creation or return on investment since the property will never legally belong to the Tenant, and instead, the Tenant is paying towards the Homeowner’s home loan.
– When renting a property, you will have no control over annual rental fluctuations which are directly affected by inflation.
– There is no guarantee that a lease will be renewed when it expires.
This article has been adapted for Money101 and was taken from: https://www.property24.com/property101/rent-vs-buy-guide/pros-and-cons-of-buying-and-renting/17510