The biggest debate when it comes to homeownership is if it’s better to rent or buy a home. Is there a massive benefit from having to purchase a home instead of just renting a place that you can call your temporary haven? This debate has been going on for a long time with polarised opinions on which one is better.
In this article, the Estate Code Nigeria team attempts to answer this age-old question. Browse through the website to learn more about this debate and which answer would suit you best in your lifestyle.
Renting a home vs Purchasing a home
Before we delve into the specifics of the pros and cons of the debate, it’s important to understand and distinguish between the two. After all, they’re different concepts that have their own advantages and disadvantages.
Renting and being a tenant
Many people consider renting as costly because you’re throwing away money each month. Although there’s truth to the statement, there’s more to it than just burning your money on your monthly payment.
Having a place to live, whether you own it or not, is going to cost you money one way or another. There will always be expenses that you need to pay and that’s the truth of the matter. Purchasing a home doesn’t mean you’re not going to pay for other costs. It’ll just be as costly as renting but you’re putting your money on ownership.
Renting, on the other hand, is a fixed rate that you pay that’s entirely dependent on the contract that you’ve signed with the landlord. You don’t rent to own the place. However, it gives you an advantage over knowing just how much you’ll have to spend per month.
Having your own home
They say that purchasing a home means that your expenses are lessened. That can be true in some cases but in most cases, you’d still be faced with overhead expenses even if you’re already finished paying off your debts.
Although, there is a benefit to owning your home. The most obvious one is that you own that place. However, this just means that you’re not going to be as flexible to move compared to if you’re renting a place.
There are also responsibilities to homeownership that are sometimes glossed over because of the tangible and intangible benefits that it brings. Often, people forget that there are other costs associated with owning your home like the repairs, maintenance and mortgage payments. Those are mostly more expensive than the monthly payments that are required of you when renting.
Despite all of these, there’s still a large benefit that should not be overlooked which is the fact that you own the place. There’s no need for you to interact with landlords anymore or even try to be neighborly with other tenants.
The key differences between the two
When you rent, you don’t have to worry about the property value of the house and how economic changes will affect your payments. Moreover, you don’t have to be concerned about housing surpluses and other exterior conditions because that’s not your responsibility.
If you are the homeowner, on the other hand, you have to be concerned about all of these things. These factors can positively or negatively affect your home’s overall condition and value.
This doesn’t mean that as a renter, you wouldn’t face expenses related to property values. You can also be faced with rental costs that can either get higher or lower as a result of the overhead expenses for the place or property.
Repairs and maintenance
Being a homeowner, you’re solely responsible for the repairs and maintenance of your home. The regular upkeep will be sourced from your income or savings. This can make a dent in your expenses and give you monetary problems in the long run.
You might be part of a homeowners association which gives you a little more flexibility when it comes to upkeep. This will cost you a few hundred bucks a month but that’s not bad. Although, there are still minor hiccups that you would be facing because of the responsibilities that come with being part of the organization.
In comparison, renting doesn’t have that same responsibility as homeownership. You just inform the landlord about the problem and they’d be the one to fix it for you. There will be times that you have to shoulder some expenses but it’s not as heavy as being an owner. However, you have to keep in mind that the repairs may not be as fast as you would like because it depends on when the owner can manage to fit it into their schedule.
One way that homeowners can benefit from having a property of their own is through tax benefits. There are home mortgage interest reductions that can ultimately bring down some overhead costs and out-of-pocket expenses that are associated with owning a property.
These benefits do not apply to tenants because there’s no property attached to your name if you are one. However, standard deductions can be acquired by all taxpayers which are also true for homeowners.
Time and commitment
Owning a home means you need to commit to the property for the long run. The same does not apply to tenants because they can leave whenever the lease is overdue. These commitments may come as a predicament for you if you’re the kind of person who works long hours and uses weekends for socialising. That’s because you have to really put in the time and effort for the upkeep of your home.
Pros and cons of renting
Unlike what others may think, there are also advantages when it comes to renting. You don’t just shell out money monthly for nothing. You get something in return even if it’s as small as having freedom from responsibilities.
There are also cons when it comes to renting. You can find out everything you need to know as you browse through this list:
The advantages of renting your home
Frees up your savings
One thing that’s steady when renting a house is your expenses. You are protected with a contract that binds you to only pay a certain amount of money for a period of time. That’s the only money that you’ll have to shell out for the property. Aside from that, you can choose to spend the remainder of your profits on other expenses such as food, groceries and other leisure stuff.
More flexible to move around
Once the lease expires, you’re allowed to either renew it or move to another place. This flexibility is advantageous for people who like to move from one place to another. You can even relocate to a better and bigger location after your lease ends.
The disadvantages of renting
No forced savings
Your mortgage is like forced savings that will be set aside for an asset that increases its value over time. This way, your money is spent on something that you would benefit from in the future whether you decide on reselling the house or keeping it for your family.
A lot more expensive in the long run
Rent increases over the years because of inflation and property price increase. The amount you pay for your contract now will definitely change depending on how the economy moves. This can either decrease or ultimately increase as time goes on. Your expenses increase because of this.
Pros and cons of buying a home
Buying a home is always marketed as something advantageous. Although that rings true, it’s also best to know both the pros and cons when you’re considering purchasing a property on your own.
The advantages of owning a home
Gives you stability and freedom
You’ll never be displaced by a landlord ever again when you own your home, as long as you are on top of paying the mortgage. You also have the freedom to apply any changes that you would like to make, contrary to renting a place wherein you’re not allowed to alter anything drastically.
You build equity
Paying off your mortgage means that you build equity. This just means that you can use that to invest and manage more funds in the long run. It’s a good idea to purchase a house if you’re aiming to do this.
The disadvantages of homeownership
It can cost more than just deposit and loan repayments
Loan repayments and deposit fees are just half of the equation. You also have overhead charges that come from repairs, maintenance, upkeep and other expenses that are associated with owning a home. The expenses aren’t going to magically disappear because that’s the reality of life. You have to put out money in order to live comfortably.
Paying interest over time
Over the term of your loan, it’s possible that the interest may fluctuate depending on the inflation rate of Nigeria. This can also be dependent on the clauses of your contract with the bank. Just make sure that you’re prepared for those instances.