Updated: Jun 26
If you live in each location for a short time, renting may be best. Even if you stay in a home for a few years, when you add up mortgage payments, taxes and maintenance costs, account for inflation and look at the bottom line, there are other investments that might net you more. BUT if you never make the alternative investments, you haven’t gained anything by renting and there are many other advantages to buying your own home.
Emotional Advantages: There’s nothing like living in a home you own verses one someone else owns. You feel free to make changes and improvements. Paint the walls any color you want. Add a deck or change the layout. You take pride in your home and yard and enjoy making improvements and maintaining it. As a homeowner, you also feel like part of a community.
Financial Control: Unless you live in a jurisdiction that controls rent increases, you have no control over how much rent will increase from year to year. Even if the housing market is flat, property owners sometimes dramatically increase rent. If you don’t have the budget for it, you have to move which means extra expenses and a life upheaval. If you choose a fixed rate mortgage like a VA home loan, your payment won’t change. You may have increases in your tax rate or slight changes in insurance, but increases are rarely drastic. If you pay utilities and your rental home is poorly insulated, you can’t do much about it. In your own home, you can make improvements to reduce your heating and air conditioning bills. Once you have been in your home for a while, you also have equity you can use a VA Cashout loan to make improvements or pay unexpected bills. Paying rent doesn’t build equity.
Automatic Investing: If you continue to rent, you can make other investments if you have money left over at the end of the month. Presumably, since you don’t have maintenance costs or taxes when you rent, you might have some extra money for investing. In some cases, where rents are high, you may not but if you do have extra cash will you actually have the self-discipline to invest it? Maybe not. When you buy a home, you must pay your monthly mortgage which means you are investing in your property.
Credit Rating: Owning a home and paying your mortgage on time, mproves your credit rating.
While paying your rent on time every month also helps your credit, qualifying for a home loan and continually building equity tells lenders more about your dependability.
If you don’t care about being a homeowner and are comfortable renting, renting and using extra funds to make other investments might work best for you. There is a set of variables and a formula that can help you decide whether it’s better to rent or buy.