By Lyssa Seward
Alexandria, VA – The decision to buy or rent a home is one that most Americans face at some point in their lives. Given the current intense housing market, the question has become more relevant to many people.
Although home prices are on the rise, it has also increased in the rental market. According to CNBC, single-family rents increased 10.9% in October 2021 compared to the year before, which is a 6th consecutive record high. Deciding what is best for you and your family requires analyzing the benefits and disadvantages of each.
Renting requires less upfront money, and you know exactly what your costs will be. No unexpected expenses, just the rent and anything else agreed to in the Lease Agreement.
Buying a home requires more money upfront and additional ongoing expenses such as property taxes, HOA fees (if you buy in an HOA), and maintenance expenses.
Your rent is paid, and then poof, it’s gone. Your rent is paying your landlord’s mortgage, which means your rental payments build your landlord’s equity in the home.
The biggest benefit of owning a home is that you are creating equity, an automatic savings account that will likely appreciate in time. According to the Northern Virginia Association of Realtors, houses in Northern Virginia have historically appreciated at an annual rate of 4.62%. Your mortgage payments are building equity by benefitting from rising home values.
Renting a home puts you on autopilot. Pay your rent, follow the terms of your lease and live your life. If there is a leak or another problem with the house, your landlord is responsible for the repair.
Buying a home means you are responsible for the costs and scheduling of all necessary work or repairs.
Rental payments are not tax deductible and have no other tax benefits.
Buying/owning a home has a multitude of tax benefits. For example, the mortgage interest deduction is a tax incentive.
Security and Control
Renting means your security only goes as far as the lease. Once the lease ends, you are at risk of having to move. Further, in many contracts, the landlord can move back into the property or sell it provided they give you sufficient notice and have the appropriate clause in the lease.
With owning, as long as you pay your mortgage, you are not at risk of being forced out of your home.
When it comes to personalizing your living space, renting requires permission from the landlord to do anything to the property, such as painting or installing shelves, changing fixtures, etc. The house is your landlord’s, and you are just authorized to use it.
Owning eliminates asking for permission. It’s your house, and you can do what you want.
Overall, buying or renting involves special consideration for your financial situation, comfort level, and plans for your future. If you plan to live in the area for only a year, it won’t make sense to purchase. Likewise, if you plan to stay for several years, buying could be a wise financial decision, especially in the NOVA area. The decision is not one size fits all, so carefully consider the factors above!