Homeownership. To buy or not to buy, that is the question….
I am part of an entrepreneur group, and today there was a discussion that sparked the debate on homeownership vs renting. Now this was directed toward millennials. I am on the older end of being a millennial, maybe that makes the difference in my opinion. The majority have no desire to own their own home. They would prefer to rent an apartment or condo. The surprising part for me, is that they do it by choice, not out of necessity. They feel that homeownership is “tying them down” and they want to have freedom. I understand not being able to afford it,but to chose to rent instead of purchasing is puzzling to me.
This prompted me to ask my millennial Facebook friends their thoughts.
Nearly every one of them said they would purchase a home vs rent. So, some said that their dream was to purchase but they couldn’t afford the down payment. But they were looking into creative financing, rent to owns, lease purchases, government loans that give 20% towards the down for first time home owners. I only had one friend say he would rather rent right now, but he said that it’s due to his age,23, and he does feel he will want to by a house and settle when he is in his late 20s.
There are of course pros and cons to owning vs renting
The Pros of Owning
- Equity. You are building up equity in your home
- You will eventually pay it off and be mortgage free
- Possibilities. You can paint, or decorate or remodel your home how you please (with city/county permits of course)
- No worries about bad landlords
- Improved credit rating. If you make your mortgage payments on time this has a large impact of creating good credit
- Your mortgage is fixed so no fears of rent increases
- Your interest and property taxes are tax deductible
- Social benefits you are staying in one place and are able to build relationships
- It is cheaper. After the initial down payment (which there are ways of getting help with those) looking at my home estimates, there is a mortgage estimate* of $674 a month and a rental estimate for my home of $1300. That’s nearly double to rent! *disclaimer I had to use the mortgage estimator as I own my home outright and do not have a mortgage
- Pets you can have your pick of domestic pets (and in some areas even livestock) where as renting you may not be able to or have to pay a “pet rent”
- It’s yours! You don’t have a landlord that can sell it out from under you, or kick you out because you got a dog and they don’t allow dogs
- Pride of ownership! You won your own home. It sounds simple but it is a big deal!
The Cons of Owning
- Possible large upfront cost for down payment
- Maintenance and repair. If something breaks it’s up to you to fix it. It can be costly
- Undesirable neighbors. If you have bad neighbors you are stuck until you sell and move or until they do
- Your property can devalue. We all remember the big market crash a few years ago
- Long term commitment. This isn’t a con for me, but it is to a lot of folks
- Not easy to move suddenly. If you get that dream job offer 5 states away, you have to go through the hassle of selling
- Homeowners insurance can be expensive
The Pros of Renting
- Less cost up front first and last months rent or security deposit
- No cost for repairs. These are your landlords responsibilities
- No property tax
- Some rentals include utilities
- Cheaper insurance. You only need to insure your valuables not the building
- Easier mobility. You can get short term leases for 3 months or even monthly in some areas so you can easily move if you chose to
Cons of Renting
- All of your rent payments go in someone elses pocket. You aren’t gaining any equity
- Restrictions, your landlord can put restrictions on pets, children noise etc
- It’s not your own. You can’t paint or tear down walls or add an extra room
- Rents can increase. When you hit the end of your lease or rental agreement your rent could jump up in price, and drastically too.
- Landlords aren’t always quick to make repairs, you may be living with that leaky toilet or broken AC for a while
- Your landlord can kick you out at the end of your lease or even before if you have a late payment (lets face it, life happens and sometimes bills are not paid on time) or you had a baby and live in a child free complex or any number of things
- Pet rent. If your landlord allows pets, many charge a pet rent which can range anywhere from $35-$75 a month per pet, plus an extra security fee for your pet(s)
I always knew I wanted to own my home.
It was important to me to be able to paint my walls whatever color I wanted. To have dogs and cats and tortoises or whatever pets I wanted. It was so important to me to have a yard for my kids to play in. I wanted my own washer and dryer, not have to go to the community laundry. That money I was paying in needed to be benefiting myself and my family not a landlord. I have happily owned my current home for almost 9 years. And while yes, it is an older home so it does need more care and repairs it is worth it!