It is a part of our cultural mindset and economy. Consider the pros and cons of each to figure out whether renting or owning is best for you. Renting means you can move without penalty each time your lease ends. However, it also means you could have to move suddenly if your landlord decides to sell the property or turn your apartment complex into condos. Less dramatically, they could just bump up the rent to more than you can afford.
The biggest myth about renting is that you're "throwing away money" every month. This is not true. You need a place to live, and that always costs money in one way or another. While it's true that you aren't building equity with monthly rent payments, not all of the costs of homeownership will go towards building equity. When you own, you might pay nothing more than your mortgage and regular bills in one month. While you might be temporarily inconvenienced by a leaking roof as a renter, it's unlikely you'll ever have to pay to replace your roof when you rent.
Your monthly, home-related expenses, such as renter's insurance, tend to be more predictable and significantly cheaper. As a renter, you face unpredictable rent increases each time your lease is up for renewal unless your apartment is rent-controlled. If you live in a desirable part of town, rent increases can be steep. In contrast, if you get a fixed-rate mortgage, your monthly house payments will never increase though property taxes and insurance premiums probably will.
While homeownership is often touted as a way to build wealth, your home can lose value. The acceptable neighborhood you moved in could decline. A major employer can leave the area, causing a significant population decline and a surplus of housing. Alternatively, there could be a residential construction boom, which could also keep prices down. Another bit of misleading conventional wisdom: Get a mortgage to get the tax deduction.
True, the home mortgage interest deduction reduces your out-of-pocket expenses for mortgage interest early in your loan term, as long as you're itemizing.
If you don't have enough deductions to itemize and claim the standard deduction, there is no tax benefit to you as a homeowner. Of course, renters get no mortgage tax deduction at all. But they can take the standard deduction that's available to all taxpayers. Do you like having your evenings and weekends to use as you please? Do you work long hours or travel frequently?
If so, then the time commitment that comes with homeownership might be more than you want to take on. There are always projects around a house that you will need or want to take care of, from finding a plumber to replacing a rusted-out pipe and repainting the bedroom to mowing the lawn. If you live in a community with a homeowners association HOA , the HOA might take some homeownership chores off your plate. That will usually cost a few hundred dollars a month.
But beware of the headaches that association membership can entail. If you rent, your landlord will take care of all the repairs and maintenance, though of course they may not be done as quickly or as well as you would like.
Although not as universal as homeowners' insurance, renters' insurance is often recommended and sometimes required by landlords for those leasing homes or apartments. However, for people who can afford to buy a house, the choice between buying and renting is always a tough one. In the Indian context, it is observed that people who can afford to buy a house tend to put more weightage on owning a house and renting is mostly a compromise.
There are definite advantages and disadvantages of both the options, and some of the advantages are summarized as:. Rent is an expense that is incurred every month without creating any physical asset. Paying EMI, however, has dual benefits; it not only provides for a one month of shelter, but also increases the proportional ownership in the house. With renting you often have to relocate which entails a lot of wasted time, money and energy, but that is not the case with owning.
Real-estate investment is a safe investment backed by a real asset which has potential of capital appreciation and tax benefits. Advantages of renting: Renting does not overburden one with EMI payments, house tax and other legal issues that are part and parcel of property ownership. Renting generally gives a feeling of lower liability. In metro cities you can rent a house worth Rs 50 lakh for only Rs 10,, a month.
At the same time, if you buy a home at the same cost, you have to shell out anywhere from Rs 30, — 40, as an EMI equated monthly installment. The choice between renting and owning is a tough one. Best private student loans. Average student loan debt. Average college tuition. How to choose a student loan. How to pick financial aid. Best tax software. Best small business tax software. TurboTax review.
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Buying a house is a big expense , but it for some people, it's worth it to have the emotional connection to a home you own, and a sense of stability that renting won't bring.
There's also a financial benefit that those who are renting won't see, like the chance to profit when you move and sell your home, or the chance to live mortgage-free someday.
Visit Business Insider's homepage for more stories. Popular Articles. Best travel credit cards. Best cash-back credit cards. Today's year mortgage rates. Owning a home allows you to build wealth to purchase future homes. And, buying could help to increase your net worth in ways renting can't.
You've got a shot at significantly lowering your living expenses someday. You'll have an opportunity for passive income. Both options have distinct advantages and disadvantages, and some of the advantages are as follows:. Rent is a monthly cost that does not result in the creation of any physical estate. Real-estate investing is a safe investment backed by a tangible asset with the potential for capital growth and tax advantages.
Renting relieves one of the burdens of EMI fees, property taxes, and other legal problems that come with owning a home. Renting gives the impression of less responsibility.
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