As of 2020, around 33% of all home buyers were first-time buyers. Millennials, in particular, are starting to face the question of whether they should continue to rent or take the leap to purchase their first home.
Of course, factoring in a hot housing market further complicates the decision. If you’re trying to decide whether you should continue to rent or whether it’s time to buy, you’re in the right place for help.
Read through this mortgage vs rent guide to learn more about each option so you can confidently make the right decision for yourself.
All About Renting
Oftentimes, people feel pressure to purchase their own home, especially when they start to notice their peers taking that step. But, let’s make it clear right from the start that there is no right or wrong answer when it comes to the rent vs mortgage comparison. It’s all about finding out what makes the most sense for you.
One myth about renting is that it’s the equivalent of throwing money away. However, that’s not the case. Regardless of whether you own or rent, you’ll have to spend money to do so. And, in some cases, renting can actually save you money, since you won’t have to cover the costs of repairs like you would as a homeowner.
Pros of Renting
So, why should you consider renting vs buying? Consider the following benefits:
- You can more easily budget for your housing costs each month since you don’t have to account for unexpected repairs
- You can move when your lease ends, without having to go through the hassle of listing and selling your home
- You don’t have to save money for a down payment
- You can call your landlord anytime there’s an issue with your living space
- You have more freedom to move out of state than you would if you owned a house
Cons of Renting
Of course, renting long-term has some downsides as well. Before you make your decision, you’ll want to carefully consider the following cons:
- You won’t have as much privacy, as your landlord may need to enter your home occasionally
- You may have to deal with noisy neighbors if you’re renting an apartment, townhouse, or condo
- You won’t have as many options to personalize your house, as your rental agreement may not allow for painting or renovations
- You may not be able to have a pet, or you may have to pay extra for a pet fee
- Your landlord may suddenly decide to sell the property, leaving you scrambling to find a new place to live
- You may face increased rental rates each year, leading to more unpredictable costs over time
All About Buying
When you’re ready to settle down in a specific location, you may find yourself ready to pay your own mortgage in exchange for a feeling of more stability. Similarly, you might want to try to build more wealth through homeownership or get more space if you intend to grow your family.
Buying a home is also one of those big “life moments” that can make you feel accomplished and like you’re achieving a goal.
Pros of Buying
If you’re trying to decide whether buying makes sense for you right now, consider the following pros:
- You can build equity in your home
- You’ll have more privacy and freedom in your own space to renovate and decorate however you wish
- You’ll likely have more space, like a bigger backyard, garage, or more bedrooms to accommodate your family
- You can qualify for tax deductions
- You won’t have to worry about pet restrictions or deposits
- You’ll have an investment that you can pass down to future generations
Cons of Buying
Of course, choosing to buy your first home is a big decision. Before you take the plunge, consider these cons:
- You’ll need to save up money for a down payment and make sure you have excellent credit to qualify for a mortgage
- If you decide to move, you’ll have to go through the time and effort of selling your home
- If your financial circumstances change, you may no longer be able to afford your home
- Your property value could drop drastically
- You may have to pay for costly repairs, especially with an older home
- Your neighborhood may decline, making it harder to sell your home in the future
- You’re responsible for paying additional fees like homeowner’s association dues, property taxes, etc
Mortgage vs Rent: How to Decide What’s Best for You
Now that you know more about the pros and cons of both renting and buying, how can you make the best choice for your needs? Start by using a rent calculator or a mortgage calculator to determine how much you can realistically afford. Then, think about how long you plan to stay in your area.
If you plan to move within the next year or so, it’s probably best to continue renting. If you want to put down roots, then it might be time to consider purchasing a home.
Next, it’s a good idea to meet with a few professionals to help you gather more information. For example, you might meet with a real estate agent to learn more about the market and a home loan broker to learn more about what kind of loan you can get with your credit score.
Then, take some time to explore what’s on the market. Remember, it doesn’t hurt to check out homes within your budget in your area. You don’t have to commit to buying something until you’re ready. You may realize that there’s nothing in your budget worth buying or you might find the perfect place waiting for you.
Take the pressure off yourself and don’t make a decision either way until you feel ready.
Take the Path That’s Right for You
After reading through this mortgage vs rent guide, we hope you have a better idea of how to make the right choice for your needs. Whatever you decide, having a safe, comfortable place to lay your head at night is all that really matters.
Want to read more home content like this while you make your decision? Check out our full collection of articles before you go.