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Should I Rent or Buy a Home?
- Maureen Landes
- Mar 17
- 5 min read
Particularly for first time homebuyers, deciding to rent or buy is a decision that stymies many. Long story short, the answer is going to be individual to you. However, in this article, we will break down some things you should consider.
Should I rent or buy a home?: Advantages of Renting
Generally, people are advised to buy instead of rent because they're "throwing their money away" or "paying someone else's mortgage." Also, there is a stigma if you are renting that you are somehow worse off financially. However, there are many reasons to rent. Here are a few:
Someone else is taking care of your home:
Appliance broke, air conditioner not working, mice? All of these are the responsibility of your landlord, not you. It's not your responsibility to pay for or spend the time and effort to find and schedule a repair person or do it yourself. This is priceless.
Amenities:
While homes in an HOA covered neighborhood also provide amenities, if you are renting an apartment, these luxuries are usually included in your cost of rent, not for an additional HOA fee (for example: pool, gym, office space, dog park, mail service, community garden...there are many creative perks offered by rental communities to keep their residents happy). Living like this can save money and also make you feel taken care of. If you purchase a home, some of these elements like a community pool might be included with your HOA, but for an additional fee.
Amenities are a plus of renting Flexibility:
If you love feeling like a nomad, or you just don't want the headache of the potential of selling your house one day in the near or far future, renting gives you the freedom and flexibility of not being a homeowner. True, you might need to negotiate or be constrained by your landlord's timelines for moving without losing money or breaking a lease, but in general it is much more flexible than owning a house and deciding to (or being informed you have to) move.
Lower up front cost of moving in:
When considering "should I rent or buy a home?" one of the main reasons people decide to rent is that there is a lower up front cost to find a home. (If you want to be a homeowner and think you can't afford it, reach out! You might be surprised to find that you can.) Instead of coming up with a 20% downpayment, most rentals will require a security deposit of one or more month's cost of rent. Additionally, you will not need to pay taxes, closing fees, and title fees when renting a home.
Only needing a security deposit instead of a downpayment is lower barrier to entry
Should I rent or buy a home?: Disadvantages of Renting
Reasons you may want to consider not renting:
No Equity Building: Monthly rent payments do not contribute to ownership. This means that after years of paying rent, you may have spent tens of thousands without gaining any asset. For instance, paying $1,500 in rent each month totals $90,000 over five years – all without owning property.
Limited Control: Renters must abide by their landlord’s rules, which can shape their living experience. For example, landlords may impose restrictions on pets or renovations that can limit how you personalize your space.
Potential for Increased Rent: Rental prices can increase when your lease is up for renewal. According to recent data, 30% of renters report experiencing rent hikes, making it difficult to manage budget expectations over time.
Renting may limit how you can renovate or decorate your home
Should I rent or buy a home?: Benefits of Buying a Home
Purchasing a home has its distinct advantages:
Building Equity:
Homeownership allows you to build equity with each mortgage payment. Historically, real estate has had long-term, stable growth in value and served as a good hedge against inflation. Census data shows the median price of a home jumped from $172,900 in Q4 2000 to $417,700 in Q4 2023. That's greater than 6% appreciation per year on average. (NAR.Realtor)
Stability: Owning a home offers a sense of long-term stability. Homeowners are less likely to face unexpected relocations due to eviction or landlord decisions, which is particularly appealing for families looking for durable solutions.
Owning home allows you to relax with the stability it brings Cost and Savings: Homeowners can benefit from significant tax deductions on mortgage interest and property taxes. Also, you don't have to worry about rent hikes or price increases on your monthly house payment.
Should I rent or buy a home?: Drawbacks of Buying a Home
Buying a home is a big commitment and comes with challenges:
High Upfront Costs: The initial expenses can be substantial, often ranging from 2% to 5% of the home’s price for closing costs alone. This can require extensive financial planning and savings.
Buying a home can be a long, tedious process, and the upfront cost of homeownership is more than just the down payment. For many potential homeowners, it takes several months to find the house they want to make a home. (NAR.Realtor)
Another example: let’s assume a buyer is purchasing a home for $275,100, (U.S. median sales price) with a 5% down payment, so the loan amount will be $261,345. Assuming closing fees are 2.5% of the loan value, the fees amount to $6,533. Assuming the buyer made a $2,000 EMD, they would need to bring $4,533 in cash at the time of closing.
Altogether, this means that the potential homeowner will need to have access to approximately $18,300 in cash to pay for the down payment and closing cost net of the earnest money deposit. (NAR)
Ongoing Maintenance and Repairs: Homeownership carries the full responsibility for maintenance and repairs. Studies indicate that homeowners should budget around 1% of the home’s value each year for maintenance. This means maintaining a $300,000 home would cost around $3,000 annually.
Market Risks: The real estate market can be unpredictable. Economic downturns can lead to property value depreciation. In fact, from 2006 to 2011, median home prices dropped by about 30% in many regions, leaving some homeowners “underwater” on their mortgages.
Key Factors to Consider
When deciding whether to rent or buy, several important factors should guide your choice:
Financial Situation: Evaluate your financial health. Do you have enough saved for a down payment? Is your income stable? If you are unsure, renting might offer the safer choice as you build a stronger financial base.
Evaluate your financial situation Future Plans: Reflect on your life goals. Are you staying in the same area for a long time, or do you expect to move soon? If relocation is on the horizon, renting may suit your needs better.
Consider your ideal living situation Market Conditions: Investigate the housing market in your area. For instance, if prices are rising, buying sooner might be advantageous. However, if the market is volatile, renting may allow you to wait for a better investment opportunity.
Lifestyle Preferences: Consider your lifestyle. Do you enjoy customizing your space? Owning a home might appeal to you more. If you prefer flexibility and minimal responsibilities, renting could be your best choice.
Making Your Choice
I hope this information has helped you answer the questions "Should I rent or buy a home?" Ultimately, whether to rent or buy depends on your personal circumstances, financial situation, and lifestyle preferences. Whether you want to rent or buy, I can help! :) Both paths come with unique advantages and challenges; understanding these will help you make a well-informed decision.
Take time to reflect on what matters most to you. Remember, there is no universally correct answer. With the right information and thoughtful consideration, you can embark on your housing journey—whether that path leads you to renting or buying—with confidence.
Maureen Landes, Realtor
New Home Co-Broker, Relocation Specialist
(202) 827-5069 text/call
Ashburn Area Expert
Loudoun County, VA
Northern Virginia
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