There comes a point in every person’s life when they have to decide whether they want to rent or buy a home. Of course, the theme isn’t as simple as it may seem at first glance. For that reason, we decided to write an article to briefly explain the pros and cons of each along with the current market situation to make sure you have all the essential information you need to make the right choice.
Without further ado, here’s everything you need to know about renting vs. buying a home in 2022:
Benefits of renting a home
Let’s start with the first benefit of renting a home, and that is more flexibility. Renting is much more flexible as opposed to buying since tenancies can be as short as six months, and you can move after this time if, for any reason, it doesn’t work for you.
It is also important to say that moving out of a rented home can often be quicker than selling a property. This could be, for example, useful in case a relationship breaks down, or any other huge change in your life comes in your way.
Less responsibility–fewer expenses
Since you’re a tenant, you don’t have to deal with all sorts of things that a homeowner has to. Let’s say that an oven stops functioning and needs a repair or, in a worse scenario, a complete replacement. It is the duty of the landlord to solve this issue quickly. This for you means lower expenses as well as overall less stress with the management of your rented property.
Disadvantages of renting a home
You’re paying for other people’s property
The most significant disadvantage of renting is the fact that every time you make the monthly payment, you know that you’re not going to see that money ever again. Whereas, if you take out a mortgage on a house, you know that every month you make the payment, you’re actually buying another piece of your home from the bank.
Choosing to rent, of course, depends on various factors that all need to be taken into consideration. If you’ve just moved out of your parent’s house, you’re most definitely going to be renting. On the other hand, if you’re planning on starting a family, buying a home can make more sense.
When you’re renting, you’re at a disadvantage against your landlord. Your landlord might decide to increase your rent when your lease is up for renewal.
Another issue that can come along the way is that you could be forced to move if your landlord decides to sell the property. That is, of course, at the end of your lease.
Benefits of buying a home
Now that we’ve gone through the biggest pros and cons of renting a home, let’s take a look at the pros and cons of buying one.
Stability and ultimate control
One key reason why people decide to buy a home is the stability and knowledge that you can do anything you want with your home.
You’re not scared if your landlord evicts you, increases the rent, or sells the property to someone else. You also don’t have to go anywhere and ask anyone if you want to change something in your house. Homeownership brings benefits such as a sense of stability, pride of ownership, along with tax deductions and equity- which brings us to the next point.
You can build wealth through home equity
The housing market has been on a stable and consistent uptrend since 2008 and is still growing. This creates an opportunity for homeowners to create wealth since the value of their homes increases year by year.
Whether they decide to cash in their profits or simply keep it in their assets is entirely up to them. The important thing is that they have the opportunity to liquidate their assets and make a profit while doing so.
Disadvantages of buying a home
So far, interest rates are still reasonably low, and thus, this should be more of an advantage. Interest rates have decreased in the past few years in order to stimulate the economy and increase spending. However, interest rates won’t be low forever, and it is expected that they will rise in the following years due to the usual economic cycle.
Owning a home is more expensive
The overall cost of homeownership tends to be higher than the overall cost of renting.
Here is a list of some expenses you’ll be spending money on as a homeowner that you generally do not have to pay when you’re renting:
- Repairs and maintenance
- Pest control
- Property taxes
- Homeowners insurance
- Water and sewer service
- Tree trimming
- Trash pickup
Current housing market situation in 2022
As we previously mentioned, interest rates are at record lows which motivates many potential buyers to acquire properties. However, as a result of this trend, we’ve also seen home prices skyrocketing and creating so-called bidding wars. A bidding war is when multiple buyers are interested in acquiring one house and try to bid the highest price to get the deal. A great thing for homeowners, but not so great for people trying to save money on the buy, so be prepared to pay a premium if you’re planning on buying a home in 2022.
If we were to sum up the entire topic, we would have to say that there is no universal step-by-step guide that works for everyone. What is important to note, however, is that statistically speaking, it makes sense to rent in the short-term (several years) and to buy in the long-term (decades). Always make sure to do enough research and consult your final decision with experts in the field that can help you.