Renting Vs. Buying: The Pros and Cons
As you weigh the pros and cons of renting vs. buying, especially in the Charlotte area, it’s important to keep in mind that the purchase of your own home can be a very real tool for building wealth.
If you’ve been thinking about buying a home but can’t decide whether it’s smart timing to stop renting, take a look at some of the pros and cons to help you make your decision. A mortgage is probably one of the biggest financial decisions you’ll make, so it pays to be prepared.
Renting Pros and Cons
First, renting does have a few advantages. Renting gives you the flexibility to move from place to place, whether you’re chasing new jobs or simply want a change of scenery. When your lease ends, you’re free to go.
And with renting, you’re not responsible for major repairs, renovations, or improvements — that’s your landlord’s responsibility.
But renting has some pretty big disadvantages, too.
For starters, you don’t build equity when you rent. Equity is the ownership you have of your home when you have a mortgage or home loan. Each month, your mortgage payment builds toward this ownership until the home is completely yours.
No equity means you’re not building wealth as a renter. Because you don’t own your rental home or apartment, that means you can’t sell it later for a profit, you can’t rent it out, and your monthly rent payment goes into your landlord’s pocket — it doesn’t get you any closer to owning a valuable asset.
And when you rent, you always have to worry about rent increases. If you live in an especially hot area, you could be seeing regular rent hikes that eat into your budget. When you buy your own home, you know your monthly mortgage payments (if you have a fixed mortgage) will be set for the next 10, 15, or even 30 years. Imagine your rent payment staying the same for 30 years!
Buying Pros and Cons
Buying your own home eliminates many of the disadvantages of renting. Instead of paying out money to a landlord every month, you’re paying down your home mortgage, getting you closer to owning your home outright.
And what’s more, all that equity you’re building — your ownership stake — could be set to appreciate at a rapid clip. That means it could gain even more value than what you’ve paid into it.
According to the Charlotte Business Journal, Charlotte home prices are expected to continue to rise throughout 2022. While renters may be wondering whether it’s finally time to take the plunge and purchase a home, existing homeowners have been watching their investment increase in value year over year. It’s one of the benefits of homeownership
While there’s no guarantee that prices will keep going up, they’ve been rising steadily for the last 30 years (with only a small dip after the Great Recession of 2010). If the trend continues, your home could be worth much more than you paid for it by the time your mortgage is paid off.
On the other hand, if you stay a renter for 30 years, not only will you not own the property you’re renting, but you won’t have any of the money you’ve spent on rent, either. Plus, there’s a great chance your rent could rise to be much more than you’re paying now. Will your income keep up?
Of course, there are disadvantages to owning your own home, too. For instance, the interest rate you’re able to get on your home loan. If your mortgage comes with a high interest rate, you could be paying more than you need to. That’s why it’s important to work with a mortgage company that will offer you options that work with your budget.
You’ll also need to save up a down payment to buy a home, which can be much more than the security deposit on a rental. Many people are worried about saving enough for a down payment, because they think they need to have tens or hundreds of thousands in the bank.
But the good news is that there are plenty of programs and other incentives that can help you with your down payment, especially if you are buying your first home.
Always explore your down payment assistance options — even if you don’t think you would qualify. You might be surprised at the opportunities available. For example, Fairway’s Charlotte mortgage planners are trained to match you with all eligible down payment programs for your situation. One such example is North Carolina’s NHCFA offers a program that provides $8,000 in assistance and can be used with a NCHFA Home Advantage Mortgage. And there are many, many more programs available, for everyone from veterans to first-time home buyers to rural buyers or economically disadvantaged individuals.
Buying a home is a long-term investment, and you should think strategically about the decision. While everyone needs someplace to live, buying that place could be a smart move down the line. Choosing whether to rent or buy your home will depend on your future goals.
For some people, renting might be the best option. But for many others, buying a home is the first step in settling their roots and building wealth for themselves and their family.
Learn more about your mortgage options by speaking with a mortgage specialist or mortgage planner, who can answer your questions and help you run the numbers. Also be sure to take a look at our comprehensive Mortgage Calculator to compare renting vs. buying in terms of your finances.
Once you discover the very real benefits of being a homeowner, you may realize that this move is within your grasp.
Resources:
https://fred.stlouisfed.org/series/ATNHPIUS16740Q
https://www.nchfa.com/home-buyers
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