Whether you own or rent your home, chances are you’ve spent time browsing through Zillow listings and looking at what your city has to offer.
And you’re not alone—in fact, homeownership rates have risen from 47% in 1900 to 62% in 2000, making the majority of households owner-occupied rather than rented.
The average American’s quest for homeownership continues to rise, with the home ownership rate bumping up to 65% since 2000. But that could change.
Recent research tells us that only 26% of Gen Z views owning their own home as extremely important, a significant drop from their Millennial counterparts.
Regardless of which generation you claim as your own, how do you know what’s right for you? Should you stick to renting or take the plunge and purchase your own pad? We’ve got your guide to making the big decision.
Should you buy or rent?
One of the biggest factors to consider is how long you’ll be living in a particular location. For example, if your job includes frequent relocations and you’re only planning on staying in your current city for a couple of years, purchasing a home may not be the best choice.
On the flip side, if you love where you live and don’t have any plans of moving somewhere else, it might be time to look at your options.
Online calculators, like this one from Nerdwallet, use your inputs to help you figure out how much you could be saving in the long run from renting or buying a home.
Crunching the Numbers
In addition to those numbers, we know that the average length of homeownership rests around 16 years for single-family homes.
While the monthly cost of ownership is lower than that of renting, the upfront fees associated with buying a home put the overall price of ownership higher for a person living in the home for only 16 years.
That being said, home owners build equity while living in a house that they can then put toward their next home, while renters get none.
While these statistics give us a good idea of the overall housing landscape across the country, they don’t reflect the reality of most individuals’ financial situations. Your calculations should also consider home value changes, costs of repairs and maintenance, a down payment, interest rates, and insurance costs. Using a tool such as an online calculator can help you get a better idea of your cost ratios.
The Pros and Cons of Renting
There are many upsides to renting, like the lack of responsibility for property taxes or potentially costly repairs. Renting also gives you the flexibility to change locations rather easily, with usually only a few months notice.
Renting doesn’t require a down payment, and you won’t have to worry about decreasing property values. You get all the joy of living in your home without any of the hassle.
On the other hand, renting limits your ability to make changes to your home, like upgrading the flooring or adding a fresh coat of paint in your favorite shade. While you’re not responsible for any repairs, you are at the mercy of your landlord in those situations.
You also won’t receive any tax benefits associated with homeownership, and you’ll likely be asked to fork over a deposit equivalent to one month’s rent when you move in. And, as we stated above, monthly rent payments do not go toward building equity.
The Best and Worst of Buying
Owning your own home gives you the freedom to change anything you like—you can take a sledgehammer to the kitchen cupboards, or splatter the ceiling in neon paint if you want to.
For many people, owning their own home is a goal they’ve worked toward their entire lives. They want a place they can call their own—totally personal, totally them.
In the long run, buying a home could also earn you money as its value increases, and you could qualify for certain annual tax benefits as well. An added bonus: those monthly payments on your mortgage can boost your credit score, too.
So what’s the downside?
Homeowners may have the freedom to sledgehammer, but they also have the responsibility of repairs and regular maintenance, including that of land and foliage located on the property. You should expect regular costs related to upkeep of your property when you purchase your home.
In addition to an often lofty down payment (usually expected to be at around 20% of the purchase price), homeowners are also responsible for property taxes and any HOA fees.
Whatever You Decide, Start Saving with a Plan
Deciding to buy or rent can be a tough choice—but saving for your goals doesn’t have to be. Whether you’re looking to own or rent, it’s important that you build a financial plan so you can reach your goals.
Lasso allows you to build a financial plan—without all the hassle of connecting your bank accounts and credit cards. Then you can share your plan with real financial advisors who will look it over and let you know how to make it better!