Should you continue renting or buy a home? There are many variables that should be considered when making this decision. For many people the first thing that comes to mind is cost. More than just immediate cost prospective buyers should consider their upfront, ongoing, and hidden cost.

What is the upfront cost? The immediate cost when deciding to purchase may be greater than renting depending on your financing options and the current market trends. Buyers will have a few initial cost when purchasing a home: down payment, home inspection, insurance, property taxes, and closing cost. Check out our home buying guide for more information on this subject.When renting your immediate cost will be the application fee, security deposit, and first month’s rent.

You’ll also want to consider the ongoing cost: either the rent or mortgage payment. For many people, this cost may be close initially. If you plan on renting in the same area you’d like to purchase you may find that your monthly mortgage payments are close to the monthly rent. However, with a fixed rate mortgage your payments will remain the same for the life of the loan. As you make mortgage payments any portion going towards the principle builds equity in your home. Should you rent you may be subject to a rate increase each year or at the end of each lease term. After a few years of mortgage payments, you’ll have equity in your home whereas after years of renting you still have no ownership. After your loan is paid in full you will own your home outright, however, after 30 years of renting in year 31, you’ll continue to owe rent on the 1st of the month.

Finally, you’ll want to think about hidden cost. If you decide to rent you can call your landlord or property manager if/when something breaks or is damaged. For homeowners, they’ll need to budget for such repairs. At some point, appliances, heating and air systems, windows and roofs may need to be replaced. While some of these repairs may be costly, they can also be selling points should you decide to sell your house.

I’ve broken down a list of Pros and Cons to consider when weighing your options.

Ownership Advantages

Build home equity and wealth
You can take tax deductions
Your space, your rules (pets welcome)
Ability to remodel, customize, upgrade and update as you’ like
Pride of ownership
Mortgage can improve your credit history/score
Appreciate benefits, can borrow against your home (HELOC or cash-out)
Once paid off you’ll own it free and clear
Fixed mortgage stays the same as rent rises
Mortgages are historically the cheapest loans available
No landlord or management company to deal with
Can exclude capital gains when you sell (partially)
Inflation hedge
Forced savings
Leveraged investment
Can rent out to others
Can sell and use proceeds for bigger/better home
Retirement nest egg
It’s the American Dream!

Ownership Disadvantages

Home value may depreciate
Could overpay for your property
Obtaining a mortgage and finding a home can be time-consuming
You must pay taxes and homeowners insurance
Total housing payment can be more expensive
Sizable down payment may be required
Maintenance costs can be excessive
HOA dues may be an added expense
Most follow HOA rules and regulations
Owning is a more long-term commitment
Increased liability and responsibility
Costs of selling is more than just hiring a moving company
Owning means, you’re responsible for all maintenance cost
Can be foreclosed

Rent Advantages

Possibly cheaper than a mortgage payment
Fewer or no maintenance cost
Lower upfront cost- no down payment required just security deposit
No property taxes
Fewer responsibilities
Less commitment (leases vary from month to month to several years)
No risk of home price depreciation
Some utility bills may be included
“Free” amenities such as pool, gym, security
Money can be used for other, more profitable investments
Can’t be foreclosed on

Rent Disadvantages

Rental payment may exceed monthly cost of mortgage
No ownership or wealth creation
Payments never stop when renting
Rent will increase over time, sometimes annually
Must deal with a landlord or management company
No tax benefits
Rules, regulations, and limitations (can’t paint, customize, maybe no pets allowed)
Less stability
Always at the mercy of the property owner
Can be evicted

Are you thinking about buying a home soon? Check out our Steps to Buying a Home Guide. Feel free to give me a call at 703-539-2053 or email [email protected] to schedule a private showing of this or any other property.

About the Author: The above article was written by Abraham Walker, Your Northern Virginia Real Estate Agent, helping clients market their homes to achieve high sales with a quick closing time is my main priority. He’s the co-founder of Ask A Walker and can be found on YouTube, Facebook, and HERE on this blog.

I can be reached via email at [email protected] or by phone at (703)539-2053. I’m happy to answer all your real estate questions.

I help people sell and buy real estate in the following Northern Virginia area cities & neighborhoods: Kingstowne, Island Creek, Cameron Station, Overlook, Alexandria, Old Town, Belle Haven, Fort Hunt, Mount Vernon, Springfield, West Springfield, Burke, Lorton, Woodbridge, Lake Ridge, Manassas, Annandale, Fairfax, Arlington, McLean, Reston, Herndon and of course Vienna.

If you found this post helpful please share it with others interested in keeping up with Northern Virginia real estate. Check back next month for an updated list.

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