Most people experience this event, one time or another, in their lives. Growing too old and too ashamed of taking both physical and financial resources for free from their parents, people may choose to separate themselves from their family and live a life of their own. Part of adulthood is withdrawing oneself from the place in which they grew, a coming of age journey of sorts– moving out. And this is how society progresses, one generation to another. This step is monumental, serving as one of the most significant events that can happen in everyone’s transition into adulthood.
There is an aspect of it, however, that some people often don’t take heavily into consideration during their adolescent years, and that is their future living situation. Though the possibilities are endless, the different types of living situations can roughly bifurcate into two categories: renting or buying. Renting an apartment involves the periodic payment of fees to keep living in said space while buying a house entails the gradual payment of fees that would end with the ownership of property. No matter how insignificant the differences are– shown by the similarities in monthly payments and legally binding contracts, renting and buying living space show key distinctions when it comes to the cost of maintenance and tax incentives.Considering one’s future involves looking at possible ways of living outside one’s childhood home, and seeing patterns that would make this move easier.
Despite being distinct and separate financial methods of acquiring a place to live, there are overarching similarities between buying and renting a home, apartment, condominium, etc. that need consideration. One of these similarities is that both include monthly payments. When people rent, it is their obligation to pay every month, and most of the time utilities such cable, internet, water, electricity, and other payments are also required: “A tenant pays a monthly rent to the landlord for the benefit of residing in the apartment” (Thompson).
Homeowners also face the same monthly obligations: “Homeowners pay a monthly mortgage payment to the lender to pay off the loan” (Thompson). Moreover, the consequences of missing said payments, both in renting and buying, are often harsh: “Failure to pay your monthly payments on time can lead to eviction or foreclosure”(Thompson). Furthermore, there are legally binding documents signed by both prospective renters and buyers; both have to “…sign a contract with a third-party for the property” (Thompson).
Whether it’s signing “a lease that outlines usage of the property, rules for living in the property, and an agreement of notification of termination. or Deeds of trust that outline paying back the loan, escrow payments, homeowners insurance requirements, and what happens if you default on the loan” (Thompson), both renters and buyers are legally obliged to pay their dues. These important parallels between renting and buying– be it monthly payments or legal obligations– are important things to take into account. However, there are apparent differences that may make people more inclined to choose one from to the other.
Deciding factors that can make people either rent or buy may include the difference in the cost of maintenance and the tax incentives associated with each method of living. The cost of maintenance for renters is relatively lower. When people rent, per se in an apartment complex, there are custodial personnel tasked with fixing leaks, plumbing issues, and any other labor that associated with maintaining a substantial living environment: “When you’re a tenant, your landlord is responsible for paying to fix any issues with the property, whether a leaky roof, a cranky furnace or a burst pipe” (Bellinger). On the other hand, the homeowner is responsible for maintaining all these things; from cutting the lawn to unclogging the toilet, the owners either have to do it themselves or hire someone else to do it for them.
As a homeowner, “You’ll also need to pay for maintenance and repairs, whether a few bucks to fix a leaky faucet or thousands to replace your roof.” It may seem like renting would be the most financially logical, however, there are perks associated with home ownership that are not available for those who rent. Unlike renters, owners are available to receive tax refunds/ returns for paying off their mortgage: “Homeowners can also take advantage of tax deductions, which can lessen the cost of owning a home” (Vasel). Moreover, people earn capital gains– which is “tax imposed on the profit… resulting from the sale of an investment” (Bell) — relief if they decide to re-sell the house.
Bankrate.com says that “When you sell your primary residence, you can make up to $250,000 in profit if you’re a single owner, twice that if you’re married, and not owe any capital gains taxes” (Bell). This is a crucial difference because if you move out of an apartment, you often get nothing in return. Although renting and buying may seem like they aren’t all that different, knowing these differences are noteworthy if you are considering the resale value of your dwelling.Even though renting and buying share some striking similarities, shown by their monthly cost and legal repercussions, differences are evident when analyzing the arrangement in terms of taxation and overall maintenance and upkeep.
It is fundamentally up to the people to decide which is best. Ultimately, home ownership and renting all revolve around this idea of independence, independence of which can only be attained by having a place to call your own. Whether it’s moving out and starting a new life, or just exploring the different ways there is to live, knowing the key differences and similarities between owning and buying can prove beneficial.
It may even be the deciding factor as to whether people’s future finances are either burdened or alleviated.