One of the most common questions that people face these days is whether it is better to rent a home or own a home. This is especially true in recent months as the COVID-19 coronavirus causes stress and uncertainty for everyone.
During times like these, more people than ever have questions about the best housing options for both short- and long-term stability. Although this question is common no matter what else is going in the world, stressful times can make it even more difficult to answer whether you should buy a house now or continue to rent.
Like many aspects of real estate, the answer to these questions can differ greatly from person to person, depending on your specific needs and situation. The best way to know the best course of action for you, personally, is to speak with a real estate agent who knows your local market and larger national trends. With that in mind, here are some key considerations when considering whether renting vs owning a home during coronavirus is the right move for you.
Your location matters
Before we start getting into the pros and cons of buying or renting, it’s important to note that your location could have a large impact on your decision. No two housing markets are the same in the United States, and there could be important opportunities or restrictions that you will need to take into consideration when making your decision.
Depending on your local real estate market, there might be unique benefits to owning or renting a home that does not translate to the rest of the nation. In Washington DC, for example, qualified applicants can receive up to $80,000 in gap financing assistance, closing costs assistance, and zero-interest loans towards purchasing a home. Other states offer student loan forgiveness or first-time home buyer loans that make it much easier to purchase a home and begin to build wealth, even with worries about COVID-19 so abundant.
On the other hand, your location might determine whether or not you will be able to take advantage of rent freezes or forgiveness while the coronavirus crisis persists.
It can be difficult to know the specifics of your local market, especially in hot areas where homes move quickly and the situation can be different week-to-week. The best way to get a sense of your locale’s nuances is to speak with a real estate agent who specializes in the city or neighborhood. A good agent will be able to help walk you through the best options available to you, both based on your means and on the specific quirks of your local market.
Now, let’s look at some of the benefits and drawbacks of renting a home vs. buying a home in 2020.
The pros and cons of renting a home
In general, renting a home is ideal for you if you are looking for a short term residence. Paying a lease instead of a mortgage gives you the freedom to move once the contract is up. If you need to move even quicker than that, many landlords will allow you to sublet your apartment if you can find another tenant to take over the lease.
When it comes to buying, many realtors suggest that you should not purchase a home unless you plan to hold on to it for at least three years — any shorter than that, and you risk losing big on your investment or being stuck in a home that you don’t like. So if you rent your home, you greatly reduce the risk of getting trapped in a property that doesn’t suit your needs.
Even if you are unable to wait until the end of your lease agreement to get out of a rental home, breaking a lease can be easier than getting out of a mortgage. Usually, there is some sort of fee that you incur when you break your lease — often a portion of the lease or the remaining balance on the agreement. There are fewer ways to get out of your mortgage, and the financial cost can be much higher. This means that renting can be a better option for people who need short-term freedom or expect that they will need to move in a short time span.
This short-term liberty is more important than ever right now, at a time when so many people are stressing over financial and physical security.
Most of the cons of renting your home right now are about opportunity cost. Renting your home is not an investment, so you can’t make any money by selling the property for a higher price a few years down the road.
The pros and cons of owning a home
The main benefit of owning your own home is that you can use it to generate long-term wealth. As a homeowner, you can sell or rent out your house to other people to turn your property into an investment — in fact, homeownership is a massive common denominator for how American millionaires have created their wealth.
When you own your own house, you don’t have to answer to someone else to make cosmetic changes or call a technician to fix an appliance. Buying a home affords you the autonomy that is not always available for people who rent their homes.
As a final pro, owning your own home in some situations can get you more “bang for your buck” in terms of home size and features. Depending on your local market and current financial situation, you can purchase a quality home for the same monthly payments or possibly lower than you would be if you were renting a property.
In terms of drawbacks, buying a home is a much larger commitment than renting, in terms of both time and money. Getting favorable mortgage rates can require that you put down quite a bit of money, up to 20% of the home’s value. As mentioned above, many realtors suggest that home buyers hold onto their property for at least 3 years, making it a large time commitment to purchase a home instead of taking out a lease.
There are also a lot of hidden costs that come with owning a home. Routine maintenance, emergency repairs, taxes, utilities, and HOA fees are all extra costs that you will have to pay on top of your mortgage.
Due to the unusual stresses of the current times, with COVID-19 making so many people uncertain about their long-term finances or living situation, these cons could be a dealbreaker for many people when it comes to buying a home.
Verdict: Renting vs Owning a Home During Coronavirus
At the end of the day, the question of whether you rent or buy a home in the current times relies heavily on your personal situation. Some markets are more favorable to new buyers than others and some potential homeowners are ready to commit to their new property in the long term.
Overall, however, we have seen many people choosing to rent their homes for the time being — and for understandable reasons. With so much confusion and stress in the world, a lot of folks prefer to avoid the financial commitment of buying a home in favor of the shorter term option. This also makes sense for a lot of people who might be interested in buying a home if the pandemic weren’t causing so many issues. The good news is, you can always rent your home for the time being, then move on to buying your own home once things settle down!
