Which is Better: Renting or Owning a Home?

Which is Better: Renting or Owning a Home?

Home ownership has traditionally been a big part of the American dream. And yet, less than two-thirds of Americans own homes. Obviously, Beverly-Hanks believes in the power of home ownership to offer long-term economic stability and mobility. But ultimately, the decision to rent or buy your home is up to you and the lifestyle you choose to live.

As you contemplate your decision to rent or buy a home, it’s best to keep the advantages and disadvantages of each decision in mind. Here are the pros and cons of renting or owning a home.

Owning a Home

Pros of Owning a Home

1. Protection from Rising Rent: With the ability to lock the interest rate on your mortgage, you can comfortably plan your budget several years in advance if you want to. The economic stability from managing a mortgage, along with the equity you’re building in your home, are two of the biggest financial reasons to buy instead of rent.

2. Tax Advantages: There are significant tax advantages to homeownership, including property tax deductions and capital gain exclusions. Over time, these tax advantages, especially when coupled with the equity built by owning your home, will add up to significant savings.

3. You can Make it Your Own: It’s a very different benefit than the financial advantages, but the ability to truly dig in a make a place your own is a great feeling. Decorate the way you want, knock out that half wall in the kitchen, add on a deck in the back. When you own the home, you have the freedom to do what you want with the space.

4. Your Children’s Success: Did you know that the children of homeowners do better in school and are more successful later in life? Children of homeowners score better on academic tests, graduate at a higher rate, have fewer behavioral problems, and enjoy a better social environment. Living in an owned home is therefore a predictor of future success: homeowners’ children earn more as adults than renters’ children, are less likely to be on welfare, and are more likely to become homeowners themselves.

5. Community and Stability: Homeowners have a much greater emotional and financial stake in their neighborhoods than do renters. Homeowners are more likely to participate in local organizations, they are more likely to vote, and they are more satisfied with their home and their neighborhood. Because owners also tend to remain in their homes longer, they add a degree of stability to the neighborhood, itself, as well.

6. Vehicle for Retirement: With every mortgage payment, you are building valuable equity in your home. This equity could be used to trade up to a larger home, or it can be saved and leveraged in your retirement.

Cons of Owning a Home

1. Saving for a Down Payment: While in many cases, home buyers don’t need as much of a down payment as they may think, you’ll still need to have some cash up front. In addition to the down payment on the home, buyers need to have money saved for closing costs, moving costs, and any initial repairs or replacements the home may need.

2. Property Tax and Insurance: Even with a fixed-rate mortgage, your property tax and home insurance rates could change over time. What’s more, your property tax could be set up as a one-time annual payment. If this is the case, it’s one hefty payment to plan for!

3. Homeowners Associations: In addition to your mortgage, insurance, property taxes, utilities, and other basic expenses of home ownership, you could see one more. Homeowners associations (HOAs) charge sometimes hefty monthly, quarterly, or annual membership fees. While these fees go towards community amenities, they must be considered when budgeting.

Renting a Home or Apartment

Pros of Renting a Home or Apartment

1. Flexible Lifestyle: In many ways, it’s much easier to move from apartment to apartment than it is to sell your home and buy a new one. For one, you never have to worry about finding the next renters for the space like you would when selling your home. If you’re early into your career or you have a more nomadic personality, renting could offer the flexibility you need to pick up and go.

2. It’s not Your Property: Is the toilet leaking? Is the basement flooded? Did the refrigerator die today? If you’re renting, part of what you’re paying for is the freedom from the maintenance responsibilities of home ownership. Not only do you not have to worry about completing the repairs, but you avoid the surprise repair costs, as well.

3. Utilities are a Maybe: It’s quite possible to find apartments that have some or all utilities rolled into the rent. This means fewer bills for you to manage each month, as well as the ability to budget without worrying about seasonal heating and cooling costs or how much water you’ve used this month.

4. Investment Flexibility: When saving for a home, savers often put off other financial goals. With a lower barrier to entry, renting gives you the economic flexibility to save for other goals, such as going back to school or that vacation of your dreams.

5. No Risk of Depreciation: Home prices are climbing steadily at the moment, but the memories of the Great Recession are still fresh in many people’s minds. With renting, you never have to worry about the downsides of depreciation or the real estate market at large.

6. Amenities Included: Your rental, whether an apartment or home within a planned community, could come with a variety of amenities. From walkability to gym space to public pools to entertainment space, your rental could include access to many things for which you as a homeowner would have to pay additionally.

Cons of Renting a Home or Apartment

1. Rent is Rising Faster than Income: A 2015 Harvard report on rental housing found that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy day and pay other bills, such as food and healthcare.

2. You Still Need to Save: While the upfront costs of renting are not as high as buying a home, there are still many fees associated. First and last month’s rent, a security deposit, and in some cities a broker’s fee may be required. Add that to moving costs, and it’s not cheap.

3. Pets can be a Problem: You know that your pitbull mix is the sweetest dog on the planet, but that won’t stop some apartment complexes from banning him (and you) from renting there. Even when pets are allowed, renters must also cover a noticeable pet deposit up front.

Which is Better: Renting or Owning a Home?

Bottom Line: Should You Rent or Buy Your Home?

There are many factors at play in the decision to rent or buy a home. It’s quite possible that your best decision five years ago is different than your decision today. And in another five years, you could want something else again.

But if you are looking at your finances today and thinking it may just be easier to rent, we urge you to take another look. A recent Fannie Mae study showed that only 37% of Americans believe that they have “significant equity” (greater than 20%), when in actuality 83% do. With homes appreciating at the current pace, it can be easy to build up equity quickly—making it easier than ever to Live the Life You Choose.


All real estate is local. In order to make confident real estate decisions, we believe it is important for you to have timely and neighborhood-specific information. The professional real estate agents at Beverly-Hanks & Associates are here to help you make informed decisions about purchasing real estate. Contact us today to speak with an agent about buying homes and land in Western North Carolina.



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