A lot of people wonder whether it’s better to buy or rent a property. They often ask whether the answer is different depending on if you are thinking about the short or long term. For instance, it might be better to have a home in a long term because then you have a sum of cash that you can always rely on. If you ever get into a difficult financial situation, you can just sell your home. Then again, renting allows you more freedom to move when you want to or need to. But for now, let’s think about the financial benefits and disadvantages of each of these options.
Is Renting Dead Money?
You might have heard the term dead money before. It simply means that you’re paying for something without getting any long term benefits from it. For instance, you might rent a home and then spend some cash renovating the property. However, this would certainly be dead money because ultimately it’s not your property. Eventually, you will leave without any benefits from those renovations.
Does That Mean It’s Cheaper To Buy?
Not always, it’s often quite a lot more expensive to buy a home, even in the long term. We can look at this easily by keeping things simple. If there is houses for rent that you are interested in this year, you might buy be able to get one for roughly five hundred a month. That’s going to be six thousand for the first year which will still be less than the amount that you’ll have to pay on a deposit for a home. That could be roughly ten thousand. You might think that in the long term things will even out, but this doesn’t always happen. It’s possible that you’ll have to pay interest on your mortgage payments. This can mean that the cost can be a lot larger than you initially expected. Basically, you end up paying more than the home is actually worth!
What About Home Bills?
Home bills are usually a lot more expensive when you buy. Usually, this is because you’ll be living in a larger property that it is more expensive to heat and keep maintained. You will also find that once you buy, you have to pay for repairs. Obviously when you rent your landlord will typically pay for this. Then again, when you buy, you have more freedom. It’s possible to change your energy supplier to get cheaper rates or even invest in renewable energy.
Which Is Better?
It depends, if you have enough money you can get a large enough deposit to cut mortgage payments right down. On the other hand, if there’s no reason for you to settle down just yet, you can rent. Don’t forget that a home isn’t the only form of stable investment where you won’t lose the money. Therefore you could rent, save money and earn a lot more than you would if you were buying the home.
In summary, then it will depend on your financial situation when you are ready to buy. Or rent, as the case may be.
***Image thanks to Living in Monrovia***