The real estate market is hot right now. If you’ve been weighing up your options between renting or buying a house, keep reading to find out the best option.

Deciding whether to rent or buy real estate will play a crucial role in your future finances. Buying property is a huge financial commitment that can be pretty daunting. It’s important to be sure that you’re making the best decision for your future. With conflicting real estate advice on every corner of the internet, it can be difficult to decide between buying or renting property. Keep reading to learn more about the financial implications of renting versus buying real estate.

The Benefits of Renting a House

Renting is the perfect option for people who want their own space but don’t want the commitment of owning a home. When you rent a property, you can move whenever you want, you don’t need to worry about maintenance and repairs, and you’re not tied down by a mortgage. 

In addition, renting a property helps you escape many of the expenses that homeowners have to deal with, including:

• Property taxes: If you own a home, you have to pay property tax. Property tax varies depending on the location of your home. In general, the higher your home value, the more property tax you’ll have to pay. 
• No maintenance: If you rent a home, the landlord is responsible for the general maintenance and upkeep of the property. For example, if the roof is damaged, you won’t have to fork up for the repair. 
• No down payment needed: Apart from a security deposit and first month’s rent, as a renter, you won’t need to find a large down payment. 

The flip side of renting is that you don’t have a stake in the property, and therefore you can’t build home equity. This can make building long-term wealth more difficult. Renters also typically cannot make significant modifications to a property, and changes they do make must be put back when the lease ends. In addition, as a renter, your monthly rent is controlled by your landlord and could change at any time. If your rent increases too much, you may have to look for another property to rent. 

The Benefits of Buying a House

 When you buy a house and build home equity, you have a stake in the greatest investment of all time: your own home. This can be highly rewarding, and a means to build generational wealth. 

In addition, buying a home can provide many other benefits, including:

• Low-interest rates: Mortgage interest rates are low right now, which means your monthly mortgage payments could be similar to the cost of rent
• Owning a home gives you the freedom to renovate and modify your property as you see fit.
• Tax benefits: Owning a home provides certain tax benefits

However, owning a home comes with certain responsibilities and expenses. It’s important to be sure that you’re ready for this type of commitment. For example, as a homeowner, you’ll have to organize and pay for home repairs and maintenance; you’ll also be responsible for paying any property taxes and HOA fees (if applicable). In addition, if your down payment is less than 20%, you may be required to pay Private Mortgage Insurance (PMI), which will increase your monthly payments.

Should You Rent Or Buy?

Buying a house is one of the biggest financial decisions you’ll ever make. So before you dive in, every prospective homeowner should ask themselves these three questions:

Do You Have A Down Payment? 

The best deals go to buyers with the best credit rating and the highest down payment. A downpayment of at least 20% will help you qualify for a home loan and avoid paying PMI. However, if you don’t have 20% saved, don’t worry. There are certain programs to help people purchase a house with a downpayment of as little as 3%. If you aren’t sure you are eligible, speak to a mortgage broker to learn more about your options. 

How Long Do You Plan To Stay In The Area?

If you only plan to stay in an area for less than two years, it may not be beneficial to purchase a home. Homeowners that sell their home within the first two years may be subject to capital gains tax and may not have built enough equity in the property to cover their costs. If you know you’re not going to stay in the same home for at least two years, you might want to consider renting instead. 

Can You Afford The Expenses Of Homeownership?

Homeownership includes other expenses besides a mortgage payment. If you’re thinking about buying a home, you should also consider the following costs:

• Closing costs
• Homeowner insurance premiums
• Property taxes
• HOA fees (if applicable)
• General maintenance fees

By planning ahead and weighing up the pros and cons, you can avoid the pitfall of surprise homeownership expenses and enjoy the long-term reward of building equity.