4 Times It’s Smarter To Rent Instead of Buy a Home
Written by
Adam Palasciano
Edited by
Amen Oyiboke
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The age-old American dream of owning a home is still the goal for some. However, it comes with a big price tag.
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Buying a home has become increasingly expensive these days. Interest rates are still high, there’s a shortage of available homes, and the median sale price of a home has reached new heights –$434,720 as of October 2024 to be exact, according to Redfin.
Some may argue that when you buy a home, you’ll build long-term wealth. However, buying a home is not always the smartest financial decision.
Here are five times when it’s smarter to rent instead of buying a home.
Buying a Home Means Less Liquidity
While purchasing a home sometimes means long-term wealth accumulation, it can also mean that your assets are not liquid. Liquidity means that you can access your wealth pretty easily, like withdrawing cash from the bank.
However, let’s say the value of the home you purchased 10 years ago has since doubled. If you’d like to gain access to the profit, you’ll have to go through the complicated process of selling your home, which often includes lots of fees and potential tax liability on the gains. If you’re looking for easier access to your money at all times, then renting might be a better option.
You’re Not Sure About Where You’ll Be Long-Term
If you finally feel settled in your community and perhaps with your career, purchasing a home may be a good idea so you put down roots. However, if you’re unsure about the future, you might get married and have kids, or if you get bored and like to move to new places from time to time, then renting is probably the way to go — at least for now.
If you own a home, you’d need to sell it if you want to move somewhere new. If you rent, you can just pick up and leave at the end of a lease.
Homeownership Comes With Continuous High Costs Compared With Renting
Buying a home just for the sake of feeling like you should or because it’s what everyone else around you is doing is a bad idea. Not to mention, it’s quite expensive to own a home. Besides your monthly mortgage payment — which you’ll likely be paying for 15-30 years, you’ll need to pay for utilities, maintenance, necessary home improvements, property taxes and homeowner’s insurance.
For example, if you live in an area prone to natural disasters, you can expect your homeowner’s insurance to go up over time. When you rent, all of these costs are rolled into one monthly payment: you never have to worry about the cost of fixing a leaky pipe or broken window and you’ll be exempt from insurance, taxes and more. While the cost of your rent will likely rise over time, it may still be cheaper to rent versus owning a home in the long term, depending on where you live.
You Don’t Want To Deal With Maintenance
One of the biggest responsibilities of owning a home is constantly maintaining it. Even if you move into a new construction home, expect things to break over time which may need repairs or total replacement. If your water heater breaks or your roof needs to be replaced, you’ll be financially responsible.
If you opt to rent instead, you’ll never have to pay for any maintenance or repairs since your landlord will be the one on the hook.
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