The topic of renting vs buying a house attracts a sharp debate across the divide. Both sides have valid points so it can be quite confusing. Recent changes in tax laws make owning a homeless advantageous when it comes to finances, and this strengthens the debate on buying vs renting a house. Majority of people are renting on the cheap as compared to what they would pay were they owning a home.
The affordability of a house is always a huge topic. Making a decision on whether to get started onto the property ladder or just continue renting can be a confusing decision. Since renting vs. buying is a debate that never ends, this article takes a look at the pros and cons of both sides, to help you make a better and more informed decision.
The Pros of Renting
If you choose to go by renting life over homeownership, you will not be spending your savings on a deposit or even on other costs associated with buying a house. Renting means that you are freeing up your savings to spend or invest in something different. Depending on what and where you invest your money, you can get a higher return on investment than what you would get if you bought a house. You may opt to rent if you are at that time of life where you feel you are not ready to spend to spend your monthly income towards committing to a deposit or paying a mortgage.
Renting a house gives you more flexibility. As a tenant, you can freely relocate from one place to the next once your lease agreement expires. Renting a home also allows you to diversify your investments. With renting, your savings are not tied up in a single investment. You can use your savings across a wide range of investments thus spreading the risks.
Cons of Renting
Renting a house comes with its sets of cons. First, you have to realize that rental costs are ongoing. Depending on the place you choose to live, your mortgage repayment may initially be higher as compared to the cost of renting, but with time, and as you repay the loan, the interest charged is reduced once the principal is paid off.
With renting, there are other issues; no forced savings. A mortgage is more like forced savings as you are required to pay it every month. When you rent, you are deprived the chance to put your money towards an asset class that could potentially increase over time.