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Renting V Owning: Which One Is Best For You?

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Whether to buy or rent a home is a decision very specific to individual circumstances and considerations. Generally, many younger people start independent living by renting – possibly due to moving around to establish their careers, and also due to hefty upfront costs ruling home ownership out until their salaries rise. Conversely, some older people may choose to sell their homes to release capital, in the process becoming renters again.

As a result, according to this source, US home ownership fell in 2015 to its lowest level since 1967 at 63.4%, compared to the ownership boom of 2004 when home ownership was at 69.2%.

The pros and cons

So which is best for you – renting or buying? As said above, it will depend on the individual but the advantages and disadvantaged might help clarify things.

Financial – many focus on the idea that you’re investing when buying as opposed to renting, but the overall costs of servicing a mortgage and maintaining a property need to be taken into account. A good starting point in calculating costs is this online housing calculator.

How settled are you? – are you likely to move in the short term or does it look like you’ll stay in the area for longer? Buying a property and moving soon after could be expensive even if your property has increased in value. If uncertainties exist as to whether you’ll be on the move (perhaps changing work circumstances in the offing) it may be more sensible to rent for a while.

The area – maybe you need time to decide if an area is suitable for you before committing to buying? Finding somewhere to rent in a new area is much easier than finding somewhere to buy – try this resource for more information  on rental properties and look by area to instantly see a selection of rental properties and the price involved in living in them.

Psychological – home ownership is very aspirational in the US, so you may feel you’re progressing in life and achieving something by buying. Some people are less bothered, so it’s a very subjective factor.

Another psychological consideration is that of ‘security’. Although you can lose your home if you can’t pay the mortgage, on the other hand a landlord can ask you to move out at any time and rental costs can rise purely on market forces. So can house prices of course, but once you’ve bought one the price to you is effectively frozen. Your mortgage payments can fluctuate subject to interest rates but it’s likely less severe than sudden rent rises.

Community – owning a home can make people feel more ‘connected’ to where they live and create a sense of belonging.

Creating a ‘home’ – owning a property means you can more or less do what you like with it (subject to planning regulations). Decorating in whatever colors you choose or adding features and generally changing your environment aren’t options generally open to renters.

Equity – along with building equity in the property when you buy, it gives you the chance to raise money later on against the equity you’ve built in your home. For example, you could borrow to finance a home improvement or – when the mortgage is paid off – borrow against your home’s value for a major purchase such as a second home or child education costs.

A balanced decision

It’s important to look at the overall picture when deciding whether to rent or buy, and remember the significant impact the psychology of property owning or renting has on the situation.

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2 comments

  1. Some older people might downsize by selling their larger home but buying another smaller one. This too, might free up some equity while still giving them peace of mind in owning their own place. I disagree with one common belief that renting is throwing money away. In both renting and buying, you are purchasing shelter. All the other considerations are very personal.

  2. I couldn’t agree more that this decision is really dependent on circumstances and preferences. I’ve been in the corporate industry for 6 years and still prefer renting as I still do not have the budget yet to get a home and probably I’d still rent even when I get married and wait for the right time when to buy a house once everything is settled.

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