Understanding the pitfalls of renting can help you make an educated choice for your family. Although many renters often believe it cost less to rent than to buy, buying a home can be 45 percent cheaper than renting, reports Jed Kolko, chief economist at Trulia, in a Huffington Post column. Renting is an affordable alternative if you desire the flexibility or can not afford up-front costs, but understanding the disadvantages can help you better weigh your options.
No Financial Incentives
Giving up renting also has financial incentives. Not only will you have stable residency and a chance to build equity, but you can receive savings and tax credits for becoming a home owner. Over the course of six years, the average homeowner’s monthly payment will be less than a tenant’s monthly rent, according to Ginnie Mae. The government also provides tax incentives for homeowners. Interest on a house loan is tax deductible as are property taxes. Other perks of homeownership include the exclusion of profits from capital gains and energy-saving rebates or tax incentives from companies or your state government if you install green appliances.
No Equity
Monthly rent payments consist of money that is not being invested in long-term security nor is it building up savings. Homeownership, despite popular opinion, is an equitable long-term investment. Like any investment, it has risk, chiefly with the value of the property and house. You can take steps to increase the value of your home and property and decrease risk. If you choose a location where new construction or growing economic activity is occurring, the property value increases. If you invest in renovating your home, your house value also goes up. If you are renting, any changes you make toward the house increases the value of the landlord’s property. If new shops open near your apartment, the property value will increase, and eventually so will the rent price.
Instability
Your family is living in a rented house on a temporary basis. Any infraction allows a landlord to remove you with a 30-day notice . Plus, he can kick you out if he wants to sell the property. As inflation pushes up the cost of living, your rent goes up as well. Even apartments in affordable housing programs can raise monthly tenant rent over changes in a tenant’s income or changes in a utility analysis. Homeowners are permanent residents and their family will not be forced to leave unless their mortgage defaults. Fixed rate mortgages offer stability to homeowners who can not afford purchasing a home upfront. Fixed rate mortgages are comprised of consistent monthly payments, regardless of the economy or your paycheck.
Regulations
Many apartments will not allow for any renovations or major decorative changes to their units or houses, such as changing counter tops or painting the walls. If you choose to buy a home or unit space, you can customize the look of your space with no regulations. You can renovate a room or the entire house to make your home more valuable or more livable. Some apartments also do not allow smoking or animals and have restrictions on the amount of people on a lease. If you own your own home, you can have anyone or any pet living with you.