In my experience, it is the math and the upfront costs that shy people away from buying and staying in the rental game but there is money out there for you to find that can help ease the upfront burden. The government and many financial institutions offer first time home buyers programs and/or grants along with low down payments. Add in the current low-interest rates and you may have more buying power than expected. A little research and talking to the right people can help point you in the right direction. But there are other things to consider.
Are you looking to settle? Or will you be on the move? Renting is typically a 1-year lease, and
then you can venture to somewhere new or stay if the landlord allows. If you like to change your
surroundings or have a bit more freedom, renting may be better for you. If you are looking for long term
security, a place to plant roots, or build equity, buying will be more appealing.
BUYERS CAN MAKE CHANGES
If you buy a home, no one can tell you if you are allowed to paint your bedroom a certain color.
It’s yours, of course, you can. Renters do not always have this option. They have less ability to customize
their living space inside and out. Do you have pets? That is a big one because it seems fewer landlords
are open to allowing pets and dealing with the potential problems that can arise when trying to find new
tenants. A homeowner is the decision-maker.
RISKS-What if something breaks?
When buying anything used, there is always a concern that there is risk involved. Unless you are
building a new home, you will be buying a used home in a sense. If you buy a house and something goes
wrong, it is your responsibility to fix it. There are many things that can be done to minimize risk or shine
a light on possible future issues-for example through an inspection-but there is no guarantees that
nothing big or small will need fixing/updating/etc. Renters can call their landlord and inform them of any
issue, and it is the landlord/owner’s responsibility to address it. If not, they may be violating their own
The monthly expenses are different for homeowners and renters. Typically, renters sign a lease
that says their rent will be X amount every month for X months. After the lease, the landlord can allow
you to stay at the same monthly rent or raise it or ask you to move out. Buyers will have a mortgage
payment of the same amount due every month unless they have an adjustable interest rate. So
depending on your mortgage-say 30 year fixed rate- you would know what your exact monthly payment
will be for 30 years. A renter only knows for the term of their lease.
As a homeowner, you will be responsible for all utilities, taxes, homeowners insurance, and any
others. Some renters have their utilities covered in their rent or at least some of them like water and
trash removal. Some apartments may require renters insurance but not all, and it is a great deal cheaper
than homeowners insurance.
The main advantage in most eyes of buying is that you are building equity and buying an asset
that will appreciate over time. Renters are giving money to the owner, who then uses the renter’s
money to build equity for themselves.
There will be a separate blog to discuss the intricacies of equity and appreciation in the near future.