For most families, buying a home is always a better choice than renting one. However, is it always true? If you have huge money, personally-owned home may be the choice as you feel more comfortable. Nonetheless, for those who are still struggling to reach financial independence in their life, renting a home can be more effective than buying one. Why? Let’s see some reasons below.
Why Is Renting a Home A Better Choice?
Actually, controversies remain when it comes to choosing between renting a home than buying one. Both sides have their own advantages and disadvantages. However, the recent changes in the tax law make many people re-consider their plan to buy a home. The following are some reasons by buying a home may not be the choice:
The Cost of Home Ownership
Many people fail to anticipate the true costs of home ownership. As a result, they are surprised with the amount they should pay every year. Before, people said that paying monthly or yearly rent means that you would never see your money again. However, experts begin to think the other way. It is true that you will never see the rental cost again, but you have a comfortable shelter for yourself and your loved ones.
Actually, you will also never see the money you pay for buying a home. Besides the home price itself, you will also have to pay taxes, interest payments, and other fees. Taxes, interests, and administrative fees are not increasing the investment values. Therefore, make sure to have a holistic understanding on the true costs related to home ownership. They include:
- Monthly mortgages
- Taxes
- Interest fees
- Administrative fees
- Mortgage origination fees
- Lawyer/realtor fees
- Closing costs
- Costs of buying new furniture
- Monthly maintenance costs, like lawn mowers
- Home insurance
- Mortgage insurance
- Flood insurance
- Utilities like electricity, water, and gas, and
- Property taxes
According to some homeowners, the costs of home ownership can be 50% higher than your expectation. As a result, if you are still struggling in financial terms, renting a home can be a better choice for you.
Long-Term Costs
According to some experts, renting a home can be less expensive in the long run. Why? Buying a home can be a bad investment choice if you know you will not live there for more than 5 years. For instance: you buy a home for 30-year tenure. The closing costs for the deal will be higher than the growth of investment values for the first 5 years. Therefore, if you sell the house before 5 years, the amount you pay from the beginning phases to the selling phase will be more than the increase in the investment value
Therefore, before deciding to buy or rent a house, make sure to compare the amount you pay for homeownership in 5 years than the amount you pay for home rent. The calculation should include costs of furniture, utility bills, and all kind of taxes and fees. Finally, do not forget to calculate the changes in tax laws. The higher the interest rates, the more you pay every month.