You keep hearing how it’s a buyer’s market. It seems like everywhere you go, someone is always talking about how they just bought a new house. While there is no disputing the fact that current mortgage rates are in favor of today’s buyers, that doesn’t mean that buying a new home is for everyone. Here are some reasons why renting is better than buying. In fact, there are many benefits of renting a home, but most people don’t give them much thought.
Buying a home means you plan to stay in the same area for at least the next few decades. For many people, putting down permanent roots is not a very attractive benefit for living anywhere. It can be hard to predict job stability, the growth and safety of neighborhoods, and finances. Put together, they can make the dream of home ownership less desirable than renting. Renting allows you to keep your options open so you can enjoy greater flexibility in your career and living options.
Other Investment Options
Even though purchasing a house can be a good long-term investment, it is not the only one. Many people are able to afford buying homes, however, they choose to invest their money into other types of investments, such as the stock market and savings accounts.
No Repair or Maintenance Bills
Unlike homeowners, who are responsible for paying for their own house repairs and maintenance, renters don’t have to worry about those expenses, unless they are specifically written into their lease agreements. This can be a big benefit for individuals who are not yet ready to be on the hook for expensive repair and maintenance bills.
Also, many homeowners are able to take out loans or refinance their homes to secure the money they need to make repairs, however, doing so creates more debt. Renters don’t have to worry about that.
Changing Property Values
With all of the excitement and fanfare that buying homes has received, there is a downside you need to be aware of. The market can change at any time. Even though everything currently points to the housing market being in recovery, there are still plenty of homeowners who are going through foreclosure. Some of these individuals owe more for their properties than their homes are currently worth.
Property value can be a funny thing. When you purchase a home, it has a certain property value. However, there is no way to accurately predict what that home will be worth in 10 or 20 years. Although there are research tools you can use to guesstimate your property’s future value based on its past history, many renters are not willing to gamble their hard-earned money on this type of investment.
Down Payments vs. Security Deposits
To buy a home, you’ll need at least 10 to 20 percent of its total price as a down payment. Of course, there are federal home buying programs that allow for as little as three percent down. However, that is a lot of money to come up with just to move into a new place.
Renting is a much cheaper and affordable option for individuals who are not necessarily concerned about buying or renting. Most landlords require new tenants to pay first and last month’s rent as security deposits. This is a very attractive option for people who are not interested in digging too deep into their savings and for individuals who are interested in buying but do not yet have enough money saved up for a down payment.
Still another point in favor of renting is that in order to enter a lease, you provide a security deposit, which is not to be confused with a down payment. If all goes well, the security deposit should be returned to you – with interest – when the lease is up. Given the unpredictability of property values, as well as the prospect of paying thousands of dollars for closing costs, the buyer can never know if he’ll recover his down payment upon the sale of the home.
Upgrade Living Style
Another big plus for renting is the ability to upgrade. If you are in the market for a home that offers better amenities than your previous one and you want to avoid the huge expense of purchasing them yourself, you can always move to a home that already has them. Your rent may be higher than it was before, but that doesn’t really matter since you’ll still get to enjoy all of the other benefits of renting.
Eugene Chrinian, a furniture-industry executive recommends for anyone who is not ready to buy a home to also consider upgrading their living comfort with high quality furniture. Sometimes it’s not the home that needs upgrading, but what you put in it. In fact, adding some new furniture could satisfy your desire for a new home, saving you more in the cost of moving than you’ll spend on new furnishings.
Leases Are Flat Rates, Most Mortgages Are Not
While there are some people who pay less money for their mortgage payments than they did for rent, many mortgage rates are not fixed. Despite the lowest mortgage rates in history, many home buyers have still pursued even lower initial rates through the use of adjustable rate mortgages (ARMs). These loans are subject to changes in the bond market. In other words, payments on such loans often depend on how high and low the interest rates are in the market, which change often.
his means that many people who own homes have to deal with changing mortgage payments, that renters don’t need to be concerned with. For example, a renter who signs a lease with his or her landlord is locked into one flat fee for rent until the end of that lease contract. This makes it easier for them to manage their finances because they know ahead of time what they have to pay.
Renting can be more beneficial than buying, especially if you are not interested in making a long-term commitment or a large investment into living in the same place. Before you make a decision about renting or buying your next place, carefully weigh your options to ensure you make the best decision for your situation.