Interested in renting? Read on to learn all about the disadvantages and advantages of renting a home and if it’s right for you.
Buying a home is a big step, complete with a hefty price tag, numerous hoops to jump through, and weeks of reviewing, submitting, and signing paperwork. This may all be worth it, as once the ink is dry, you have the benefit of knowing you’re well on your way toward owning property. If you’re a forward-thinker, you’ve also just made a solid investment well worth preserving.
But purchasing a home also means signing on for decades of maintenance, upkeep, repairs, and renovations to protect and maximize your initial investment. And for some, the disadvantages of owning a home may not make it worth it after all. Renting a home presents an alternative to home ownership — but renting comes with its own set of perks and limitations, and may not be the best option in every case.
Read on for a look at some of the biggest advantages of renting a home, as well as some of the downsides, and discover if renting or a residential leaseback agreement is the right choice for you.
For many Americans, renting a home may be a better option than buying. Here are just a few of the advantages of renting a home.
Home ownership can be a gratifying feeling, and many Americans may be comforted knowing that their monthly mortgage payment is being applied toward ownership. However, this comes at the cost of liability for any repairs and upkeep. Mowing the lawn, pressure washing the driveway, and tending a garden might sound rewarding to some — it’s the possibility of extensive, costly maintenance that can make renting the better option. As a renter, you get to enjoy the benefits of living in a home without living in fear that a multi-thousand-dollar repair may be lurking around every corner.
When you take out a mortgage for the purchase of a home, your interest fees are factored into your monthly payments. Generally, the better your financial history, credit score, and down payment, the lower your interest over the loan term will be. Therefore, borrowers with a checkered financial past may be penalized and forced to pay more in interest, which will be reflected in each monthly payment. These same borrowers may have no problem renting a home, on the other hand, resulting in a lower average monthly mortgage payment than if they had made the decision to buy.
While renters may dread paying deposits, typically consisting of the first and final month’s rent payments and a separate security deposit for potential damage, these costs are nothing when compared to a home’s pre-purchase expenses. Down payments, closing costs, administrative fees, and other seemingly made-up fees can total tens of thousands of dollars before you’ve made a single mortgage payment. These expenses hardly scratch the surface when it comes to the hidden costs of buying a home. When you rent, there is no need to worry about the difference between appraised value vs. market value.
Just because you decide not to buy a home right now doesn’t mean you’ll never make the switch from renter to homeowner, and renting can be a temporary solution while you prepare for homeownership. Lease terms vary from situation to situation, but the decision to rent means you won’t be stuck in one place for longer than you want. To expand on this advantage of renting a home, renters are also free from the obligations that come from a Homeowners Association (HOA). This can include membership dues and other fees, which can only add to your growing list of expenses as a homeowner.
See related: Home Selling Checklist: 6 Factors to Consider
Renting isn’t for everyone, and — if the conditions are right and the home is within your budget — buying may end up being the better option. Below are some of the biggest disadvantages of renting.
More than half of all new home buyers1 say they plan to renovate their home, and customization can be one of the most fulfilling aspects of home ownership. Making your mark on your new house can be a great way to quickly boost the property’s value and, therefore, your home equity, while also making your new house feel more like a home. With the signing of a rental lease, on the other hand, you agree to things exactly as they are. Dated interiors, unappealing paint colors, and existing amenities are likely there to stay. And if value-adding changes do end up being made, you might see a hike in rent when it comes time to renew. Are you fine with things as they are? Or is leaving your creative mark a must? Answering these questions will help you decide which pathway is right for you.
Like making on-time credit card or car payments, consistently paying your mortgage on time will steadily improve your credit over the course of the loan. Not so with rent — your on-time monthly rent payments will do little more than keep your landlord happy and a roof over your head. With that said, you as a tenant can leverage these monthly rent payments to improve your favor in the eyes of credit bureaus.2 Self-reporting your good payment history will cost you a nominal fee, but it can ultimately help give your credit a boost that you wouldn’t otherwise see as a renter.
Putting pen to paper on a home purchase agreement is effectively a guarantee that your current rate will be unchanged for the duration of the loan; if it does change via a refinance, borrowers are typically the ones that stand to benefit. Leases, on the other hand, can fluctuate with the housing market, and unscrupulous landlords can all but force renters out through higher rates. Some states have legislation in place which prevents excessive increases in rent, but it’s still anything that goes in most of the country.
Likely the biggest disadvantage of renting a home is the fact that rent doesn’t earn you home equity. Rather, it earns your landlord equity or just goes straight into their pocket. For this reason, many renters will likely aspire to put their dollars to good use by purchasing a property. But factor in the potential cost of repairs and the countless responsibilities that come with home ownership and you — like 35% of the American population3 that currently rents — may find that renting is worth the added convenience.
Renting clearly has its pros and cons, and some may find that the freedom of renting is not worth its limitations. If you look forward to the process of renovating and customizing your dream home and accruing the home equity that comes from paying your mortgage, home ownership is undoubtedly the better path. If you have a family or plan to have one, a home of your own can transcend being four walls with windows — it can be a place where memories are made, and lives are built. A commitment to a 30-year mortgage might seem daunting, but the life lived during this time will fly by.
However, if you’re looking for a turnkey solution that allows you to come and go as you please without worrying about extensive maintenance or upfront fees, you may find renting makes more sense for your lifestyle. You’re not locked into a decades-long mortgage, and even your 1-2 year lease can be broken (at a cost) if you find yourself searching for greener pastures. The truth is: There’s no right or wrong way to live, and the decision to rent or own a home comes down to your preference and circumstances.
What about people who want the best of both worlds? Though renting and owning may be the two most common approaches to living, you’re not limited to these options — and people looking to combine the advantages of renting a home with the pride of ownership may find their happy medium through Truehold’s Sale-Leaseback.
Through this modern approach, you can reap all of the benefits of owning a home and accruing equity. Then, when you’re ready to put the lawnmower in the shed, leave cleaning the gutters to a professional, and redeem your hard-earned equity, you can enjoy being a renter and all the freedom that comes with it. We’ll cover the tedious upkeep, you’ll realize your investment, and you can continue to rent the home you’ve built for as long as you want. Whether you want the freedom to see the world or just want to enjoy the fruit of years of mortgage payments, this approach may be for you.
To learn more about Truehold’s Sale-Leaseback and see why more Americans are choosing this alternative to renting or owning a home, request our free Info Kit.
1. The Home Renovation Boom Continues. National Association of Realtors. https://www.nar.realtor/magazine/real-estate-news/the-home-renovation-boom-continues
2. Does Paying Rent Build Your Credit Score? Chase. https://www.chase.com/personal/credit-cards/education/build-credit/does-paying-rent-build-credit-history
3. Renting Statistics: Trends & Demographics (2022). RubyHome. https://www.rubyhome.com/blog/renting-stats/
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