Home Sweet Home - Should I/we Rent or Buy? That's a very good question!
By: Kathy Riggs, USU Professor
April 13, 2021
Are you among the growing group of Americans who are paying rent for their home, condo or apartment long-term? Perhaps this option works well for you or maybe you are open to home ownership but have lots of questions you need answered before making such a commitment. Wherever you may find yourself when it comes to providing housing for you and your loved ones, it could be helpful to compare pro’s and con’s for each option to inform your decision-making process.
Let’s begin with a look at the benefits of renting along with some con’s or cautions-
Renter's Dream or Never-Ending Payments?
Paying rent each month isn’t just for college students or young families not yet settled in a career. Overall, home ownership in the U.S. has been declining for the past 10 years since peaking in 2009. At the end of 2020, the rate hovered around 65%. (See: https://www.census.gov/housing/hvs/files/currenthvspress.pdf ) If your plan is to rent for the foreseeable future, it may be interesting to review your choice as summarized in some common pros and cons.
Advantages to renting:
- Affordability- Monthly rent can cost nearly 1/3 less than the amount of a house payment.
- Down payment/Deposit- While some landlords will require a deposit equal to first and last month’s rent up front, most contracts allow for a sizable refund at the end of the lease if you have been a reliable and responsible renter.
- Flexibility to relocate- With an uncertain job market or perhaps more schooling in your future, living under a short-term contract makes it easier to be mobile.
- Few maintenance expectations- Depending on your situation, yardwork, main appliances, carpets, pipes, etc. may all be repaired or replaced by your landlord.
- Optional Insurance- You will not be responsible for insuring the space you are renting; however, affordable renter’s insurance will help protect your personal belongings.
Disadvantages to renting:
- Security- How protected are your belongings inside your apartment? Are you in a safe neighborhood? How is the lighting and protection for your vehicle(s)? Are windows and doors secure with sturdy locks? Check this out before you sign.
- Personalizing or customizing- You may be limited in how and what can be hung on walls, the current color of walls and carpeting, and possibly window coverings/curtains.
- Space and noise- Apartments and many condos are not known for large living space nor sound-poor walls and ceilings
- Timely repairs- This is a common frustration as renters wait for landlords to hire out for repairs that cause great inconvenience while waiting.
Home Ownership - Too Much Hassle or the American Dream?
The majority of Americans still tend toward owning their own home. However, because this type of ownership is likely to be a long-term commitment, it is useful to review several advantages and disadvantages of this option.
Advantages to buying:
- Freedom to individualize- Now you own your own space, it is mainly up to you to determine how you decorate, choose paint colors, carpet, appliances, and more.
- Pride in Ownership- If owning your own home has been on your list of future goals, this will feel like a major accomplishment.
- Sense of community- You now belong to a neighborhood and can build relationships and a sense of community or belonging.
- Design and groom your yard/garden- You can now learn some new skills and reap the calming benefits many find as they spend time outside and working in nature.
Disadvantages to buying:
- Down payment- One of the major obstacles of potential homeowners is qualifying for a long-term loan. Even if your income is sufficient, you will also likely need a minimum of 3.5%- 10% of the total loan amount saved as a down payment. When the down payment is less than 20%, the lender will likely require mortgage insurance and the interest rate will be adjustable. These can both be mitigated as you qualify to refinance the loan after a minimum wait time (2 years).
- Mortgage payments- The thought of living on a reduced income due to monthly mortgage payments for not just months but for decades may seem overwhelming! The commitment is huge, no doubt.
- Insurance and property taxes- You will need to purchase home owners’ insurance to protect your investment. Though this can be included in your mortgage payment (as an escrow service). It adds to the balance due each month but because it is automated, the consumer doesn’t need to plan or save separately. The same is true with annual property taxes. These can be paid out through your lender but the trade-off is less money in your savings account earning interest.
- Municipal/Utility fees- Moving from a single rental payment that includes utilities comes to an end with home ownership. You will begin paying monthly city/municipal fees (water, sewer, garbage, etc.)
- Upkeep/Maintenance- The yard and maintenance costs covered by a landlord when renting are now your responsibility. Experts recommend planning on spending 1% of your home’s value per year to cover maintenance.
- HOA fees- It is feasible that you may move into or build a home that is part of a Home Owners Association (HOA) subdivision. These fees may include hiring someone to take care of the grounds facing the street. However, there could potentially be fines on top of the fees if the yard isn’t maintained, sidewalks aren’t cleared or other stipulations in the HOA rules and regulations.
Keeping your options open:
If your current financial situation makes it unlikely you will qualify for a traditional loan yet you really like the area, neighborhood and home where you either currently live or plan to live, you may be interested in a Lease to Own option. This option allows you to lease the home and after a pre-determined period of 2 years or longer, you will have built up equity that could go toward a loan to buy the home from the owner—or you may choose to walk away.
Approach home ownership with your eyes wide open. Consider enrolling in an online or face-to-face First Time Home Owner education course. It just may save you having a few unexpected financial surprises during the process. If renting is more what you determine is your best option for your situation, also study it out. Some resources are indicated below.
Utah State University offers a home buyers education course for $60. For more details, visit https://extension.usu.edu/hbe/ -
Other sources of information for renting vs. buying can be found here: