Is Home Ownership Right For You?

Couple looking out at city

Though owning a home is generally a wise investment decision, it’s not a given in everyone’s situation. Renting does have a number of advantages. Arm yourself with the necessary knowledge to make an informed decision by going through this article and, if you still don’t know where you stand, do some further reading using the sources listed at the end of this page.

Advantages of renting

  • Avoid most home maintenance responsibilities, such as landscaping, snow removal and repairs.
  • Avoid the hassle of finding and buying a home.
  • If you have low rent, you could be in a better financial position than buying.
  • If you’re at a point in your life in which you’re moving around—or would like the freedom to move around—it’s a lot easier to rent than having to sell your home and move multiple times.
  • If looking in an area that has a large inventory of rental homes on the market, you’re more likely to get what you want by renting than buying.
  • Pay no property taxes, down payment or closing costs (though a security deposit may be required).
  • Fixed monthly expenditures, unlike home ownership where a major repair can set you back thousands of dollars in one month.
  • Moving is relatively easy.
  • No long-term commitment, which saves the stress of legal and financial concerns, and allows the freedom to leave rather quickly.

Disadvantages of renting

  • Miss out on the opportunity to gain equity in your home.
  • Little or no ability to expand the house as your family grows or even to renovate.
  • Rent can increase when demand exceeds supply or due to inflation.
  • Renting often does not provide the freedom to use the home however you want, such as owning a pet or making noise.
  • No access to tax benefits like income tax deductions on loan interest.
  • Lose out on the stability of owning a home (especially important to retirees).
  • Renting is not as conducive to a stable lifestyle as home ownership.
  • Having to deal with landlords.
  • Lack of incentive to buy a renewable energy system or upgrade the home with green features.

Is home ownership right for you?

If you’ve worked through the rent vs. buy equation and have decided that renting is not for you, the next step is to assess whether or not home ownership is right for you.

  • Do you have a stable income?
  • Do you have good enough financial management skills to handle home ownership?
  • Do you plan on staying put for more than five years?
  • Can you handle the costs of mortgage payments, repairs and other maintenance? It’s recommended that not more than one-third of your income go towards housing-related costs (to assess the financial aspect of buying or renting try out the New York Times’ Buy-Rent Calculator).
  • Do you have enough time to maintain the home?

If you’ve answered yes to those questions, congratulations, you’re ready to purchase a home! For the green home buyer, however, additional questions need to be asked.

  • Can you handle any potential extra costs associated with buying a green home and are you willing to absorb those extra costs because the benefit of owning a green home is greater?
  • Will the added costs of green home ownership payback in a time horizon that you’re comfortable with, given rising utility rates?
  • Can you get loans and rebates for purchasing a green home or renewable energy system for your home?

Sources:

Renting vs. Buying: The Realities of Home Ownership
Buying vs. Renting a Home?
Buy or Rent? Pros and Cons
Top 5 Advantage and Disadvantages to Owning Your Own Home

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