The decision to rent or buy is one that many people struggle with. Both options have numerous pros and cons, but more often than not it all boils down to where you are in life. Indeed, your unique circumstances, such as location, plans for the future, financial situation, and job security all play a huge role in making the best choice for you.
Having said that, when it comes to major life stages, most of us find ourselves in a similar situation. In this guide, we’ll look at whether renting or buying is the best choice for you based on your current life stage.
Renting a Home: Pros and Cons
Before we delve in, it’s worth going on the main general benefits and downsides of renting in comparison to buying.
Pros
The main advantages offered by renting a home rather than buying one include:
- Greater flexibility: Once your lease ends, you’re free to move anywhere else you like without penalty. When you own a home, you’ll need to sell it or rent it out before being able to move elsewhere. Additionally, different lease terms enable you to rent long or short-term, depending on your needs.
- Less responsibility: Normally, your landlord will be responsible for maintaining the property and covering the costs, saving you time, money, and effort.
- Reliable monthly payments: Once you’ve signed the lease agreement, you know exactly how much you’ll need to spend each month on rent. When you own a home with a variable mortgage, the payments can fluctuate, making it more difficult to budget.
Cons
While the benefits are considerable, there are also downsides to renting, including:
- You won’t build equity: When you pay your rent, that money is gone forever. However, when you own your home, each mortgage payment builds equity, making it more of an investment.
- Less stability: At the end of your lease, your landlord may decide they no longer want to rent the property or they want to increase the rent. They may even want to sell it. This makes it difficult to make long-term plans.
- Fewer opportunities to personalize: As a tenant, you’re not often able to make changes to your home, and you’re generally stuck with the decor, furniture, and appliances provided.
Buying a Home: Pros and Cons
Generally speaking, buying a home offers a different set of pros and cons compared to renting.
Pros
The main advantages of buying a home include:
- Greater stability: Once you own a home, as long as you keep up with your mortgage payments, no one can force you to move out. It also provides a greater sense of community.
- It’s an investment: Each mortgage payment builds equity in your home. And, house prices tend to increase in the long term rather than drop.
- Freedom to put your stamp on it: Owning a home allows you to decorate it any way you like, alter the layout, add extensions, and carry out all manner of changes to make it yours.
Cons
However, there are also considerable downsides to take into account when buying.
- It’s expensive: The initial cost of buying a house is rarely cheap. The down payment alone often runs into tens of thousands of dollars, not to mention the numerous hidden costs associated with purchasing property. Additionally, once you own it, you can expect to pay for any renovations or maintenance, property taxes, various insurance policies, and much more.
- It’s a lot of responsibility: As a homeowner, you’re responsible for maintaining your property, which can entail a lot of time and effort, plus considerable cost if you have issues with structural elements.
- Less flexibility: Selling your home before your mortgage term ends can incur hefty penalties, making it difficult to move away if you change your mind. It can also be difficult to sell your home, often taking several months to finalize the process.
- A chance that property prices will fall: While it’s more common for house prices to increase in the long run there are no guarantees. If your home drops in value when you sell, you could find yourself losing money, making homeownership a bit of a gamble. Unfortunately, there are many factors outside of your control that can cause home prices to drop, such as the building of unappealing amenities nearby, natural disasters, and much more.
The Best Life Stages to Rent
With a good idea of the pros and cons, you’ll have a better idea of when renting will be the best choice for you. For most people, the following stages are best suited to renting.
1. First Home Away From Home
When flying the nest and moving into your first home, it’s almost always best to rent rather than buy. At this stage of life, most people need flexibility to focus on studies or building a career, and don’t want to be tied down.
2. Starting a New Job
Starting a new job isn’t a fantastic time to buy a house. There’s a chance that things won’t work out in the first few months and you may find yourself looking for another job. As a renter, you’re much more able to focus on work, rather than juggling the responsibilities of owning a new home.
3. Retiring
This is a somewhat divisive subject, but for many retirees, it may be better to rent if you plan to downsize, even if you already own property. The physical and mental toll taken by homeownership responsibilities can become a drag once you reach a stage in life where you’d rather kick back and relax.
4. Moving in With a Partner
For many couples, buying a home together is a dream. But, if you’ve never lived together before, it’s probably best to rent first. You never really know someone until you live with them after all. More often than not, it’s best to focus on your relationship without the stress of homeownership and work toward buying a home.
The Best Life Stages to Buy
Of course, there are plenty of great times to stop renting and put a foot on the property ladder.
1. Starting a Family
If you plan to start a family and have a stable relationship with a partner you’ve lived with already, it can make a lot of sense to buy a home. It provides the stability you need to ensure your family has reliable access to schools and other amenities, without worrying about whether you’ll have to move when your lease expires.
2. You’re Established in a Career
If you’ve established yourself in a career and have a stable job, buying a home could be an excellent choice. With both job and financial security, you’re in a comfortable place to invest in your future and set down roots.
Of course, your unique situation will dictate whether renting or buying is the right choice for you. There’s no right or wrong answer and the best thing to do is to consider your financial situation, future plans, and current lifestyle.
