3 Reasons Why Renting a Home Could Be Better for Your Finances Than Buying
- Though there are financial perks to owning a home, it's not the only path to take.
- A recent survey reveals many people feel that being told to buy a home is poor financial advice.
Homeownership isn't always the most financially secure choice.
When you rent a home, housing becomes a pure expense -- not an investment. The money you spend on rent isn't money that helps you build equity in a property, whereas if you pay into a mortgage, you can eventually own a home outright that can gain value over time.
In spite of that, renting is by no means a poor financial decision. And in a new survey by "I Will Teach You To Be Rich," a financial blog, 36% of respondents agree. In fact, they think the idea of renting being a waste of money is toxic advice.
Here are three reasons why renting a home may be a better choice financially than owning.
1. You won't have to deal with surprise repairs
While it's possible to budget for some home-related expenses, like property taxes, homeowners insurance, and certain maintenance items, repairs tend to pop up out of the blue. And it's hard to predict what they'll cost or how frequently they'll arise. Many homeowners struggle to stick to their budgets because they frequently have home repairs to grapple with. But as a renter, repairs aren't your problem -- they're the responsibility of your landlord.
2. You won't have to stress about property tax hikes
Though homeowners with fixed mortgages can count on predictable monthly home loan payments, their other costs can rise over time. In fact, property taxes can rise substantially, making homeownership more expensive. As a renter, you might see your rent go up from year to year as your leases expire. But those jumps may be less substantial than the jumps many homeowners see in their property tax bills -- especially in parts of the country where those taxes tend to be high to begin with.
3. You can move to a cheaper home if your income takes a turn for the worse
There may come a point when your finances take a hit and you need to move. If that happens and you rent your home, it may be easier to find a subletter or move at the end of your lease than to sell a home.
Imagine your salary is cut and you can no longer easily afford your home. If you're on a month-to-month lease, you might get away with giving your landlord 30 days' notice and finding a home whose rent costs less. If you own a home, you'll need to make sure the housing market is a suitable one to sell in. If property values recently declined where you live, you could be looking at taking a loss.
Plus, it takes time to sell a home. You have to list it, find a buyer, and wait for that buyer's mortgage to close. That could leave you grappling with expenses you can't afford while all of that happens.
While owning a home is not by any means a poor financial decision, neither is renting. And in some cases, you may be better served financially by renting a home rather than buying one.
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