The Conventional Wisdom
For years, the conventional wisdom was that the pinnacle of the American dream was home ownership. This was the yardstick by which people measured becoming a full-fledged adult. Now they had a place of their own: rooms to decorate, lawns to mow, backyard barbecues to plan, white picket fences, two-point-five children, and a dog. It was generally accepted that this was what every person aspired to. After all, what better way for a person to gain equity than through owning a home?
Conversely, renting was viewed as something for younger, single people to do before they "settled down". Renting was what college students did after graduating and embarking on a career, of course secretly yearning for the day when they could buy a home of their own.
But, is conventional wisdom right? Is buying a home more mature - more adult - than renting? Which is truly better?
As with most things decided by "conventional wisdom", the answer to which is better is it depends. The key is deciding which option is best for you.
The Only Things Certain in Life Are Death and Taxes
The first argument that anybody, on either side of the buy vs. rent issue, will bring up is going to be the financial argument. Because home ownership is a significant fiscal decision, it's no surprise that each side has such decisive views on the subject. Renters like to remind home owners about all the added expenses owners have to shell out on top of their mortgage payment. Owners, in turn, remind renters of the equity they are building, while the monthly sum renters pay doesn't do anything for them beyond giving them the ability to remain on another person's property. And, each side has valid points.
Most people who buy a home don't enter into the process without realizing that making the mortgage payment isn't the only expense they will have; however, many of them may not realize exactly how many other expenses exist for which they will be responsible. There is the deposit, down payment, and closing costs (a broad term that covers a number of expenses associated with the transfer of real estate). And that's just to purchase the home! Afterward, there is the mortgage, possible home owner's association fees, utilities, repairs, maintenance, home owner's insurance...the list goes on. And, of course, property taxes that will probably increase over the years because, let's be honest, when was the last time you remember a municipality lowering the tax rate?
But, renters have expenses too. When first renting a property, they are usually required to pay a security deposit and, sometimes, the first month's amount of rent up front. In addition, they may have a broker fee in place of closing costs. And, while renters do not have to pay for maintenance and repairs, they may have to pay for their own utilities. Renter's insurance is another monthly expense. Oh, and renters don't escape property taxes completely: the taxes being paid by the landlord have most certainly been figured into the monthly rent payment, which will probably go up in accordance with a tax rate increase.
Since each side has its own set of pros and cons, it is important for each person to consider both sides and decide which is more feasible to fit into their budget. While home ownership has a lot of associated costs, the properties do build equity over time. Equity is, essentially, that portion of your home that you own; that is, that portion of your mortgage paid that is principal, not interest. The home's equity belongs to the owner, and he or she has the right to sell it, or borrow against it. Home ownership does also provide some tax benefits - you are allowed to deduct the mortgage interest you pay from your taxable income - although these are not always as beneficial as they may seem. For instance, as time goes on, less of your mortgage payment is interest and more is principal, lessening the tax credit. Also, home ownership generally locks people in. Once you've purchased a home, it becomes harder to move for a job opportunity, to change school districts for your children, or any other reason. For many, buying a new property before the old property sells - and thereby being responsible for two mortgages and all other expenses - is not feasible.
A renter always has the option to leave at the end of their lease, which may only be a one to two year commitment, as opposed to the ten, twenty, or thirty year commitment of a mortgage. However, no matter how long a renter chooses to remain at one place, when they do leave, they have no equity of their own, and will continue to pay rent at the next place with no consideration to the amount of money they've already paid elsewhere.
Home Is Where the Heart Is
Aside from finances, the other important consideration when choosing to rent or buy is your lifestyle. Do you enjoy gardening and take pride in your lawn? Or does the thought of mowing the yard make you cringe? How do you feel about snow removal? Are you interested in the upkeep of your very own, private pool or are you willing to share the pool with others in your complex or community if it means you don't have to maintain it? All of these are questions each person should answer honestly when making their decision. While a beautifully landscaped green lawn can be enticing when looking to buy a house, remember that it takes upkeep - either in your time and sweat, or the expense of a lawn service. As a renter, remember that the gym at your apartment complex may be a wonderful perk, but you will have to share it with the other residents.
Are you a person who likes to decorate? Do you enjoy painting walls or hanging pictures? If you choose to rent, putting your personal stamp on your place is harder to do, and may cost you your security deposit.
And, lastly, do you have any pets? Aside from any town ordinances on the topic, renter's often have a hard time finding a place to live if they own a pet. Some landlords will not accept pets of any type or size on their properties while others may only accept pets within a certain weight limit. Still other landlords may accept a pet of any size, but will increase the monthly rent. And, while a renter may currently be in a property that allows pets, if the need to move arises, it can be difficult to locate another property with the same criteria. Conversely, while home owners obviously don't have a landlord to approve of their choice of pet, they do have insurance companies. Many companies will refuse an insurance policy based on the breed of dog owned - and it's not just the obvious breeds; some companies include dog breeds on their restricted lists that may surprise you, like a golden retriever.
Lifestyle preferences are important factors to ensure that you remain happy with your final decision to rent or to buy.
A Bit of Give and Take
Is there a common ground in all of this? Well, some people believe there is. Over the past years, interest in buying condos and townhouses has increased as more and more people are looking at this as being a good middle ground between owning a home and renting a place. Condo or association fees cover maintenance, amenities, lawn care, and snow removal. However, since the property is owned, not rented, equity can be built and the owner can personalize their place to a much greater extent than a renter. There may still be certain restrictions to what extent an owner may redecorate their space without approval from the community's association. Also, there may still be restrictions on pet ownership. However, many people believe these types of properties afford them the best of both world.
Until the Cows Come Home
Being a home owner, or having the dream of being a home owner, will never be clich?. It will never go out of style. However, renting is becoming the permanent choice of more people. Each person must decide for themselves what is practical and desirable for their life. And let those that hold onto their strict views of ownership or renting argue until...well, you know.