If you’re thinking of making the jump from renting buying your first house, you’re probably well aware that some things are going to change once you’re ready to take the next step. However, you may not exactly be sure what those changes may be, or what the differences between the two will mean for you on a daily basis.
Like any big life milestone, there are pluses and minuses to making this switch. So, we’ve compiled some of the biggest differences between buying and renting to get a sense of the big picture. With that in mind, read on below to see if you’re ready to take the plunge:
1. Rent isn’t your only cost
The biggest change when you’re going from renting to buying is around where that money goes. As a renter, the costs you have to consider are relatively straightforward. Every month, you have your rent payment, plus, any utilities that aren’t taken care of by your landlord.
However, when you think you might be ready to become a homeowner, there are other costs to consider. The costs of actually purchasing the home is only one part. You have to be prepared to also make your downpayment and closing costs, which are another 1-2% of the price of the home.
Then, you need to be ready for the ongoing costs of owning a home. There’s your mortgage payment, of course. But, there are also insurance policies to worry about. Additionally, you’ll have to pay property taxes each year.
You’ll want to talk to a mortgage lender before deciding to look for home so you can be sure that you’re in the right place financially to make this move.
2. Maintenance is your responsibility
As a renter, your maintenance process is fairly simple. All you have to do is give your landlord a call whenever something goes awry, and he or she will take care of it for you. You don’t have any major stake in the ongoing maintenance of the home.
But, as a homeowner, unfortunately, you’re the one who has to take over responsibility for leaky roofs and clogged gutters. You’re either going to need to be willing to do the work on your own or to get an expert out who can take care of it for you. Taking care of maintenance regularly, in addition to when problems occur, is crucial to protecting your investment.
3. You can make changes to the house
That said, even though you should be prepared to take on more responsibility once you buy, there are also some major benefits to becoming a homeowner. One of which is that you are finally able to customize a home as you see fit.
When you’re a renter, your ability to do so is very limited. In these cases, customization is usually limited to painting walls or hanging photos and even then you have to put everything back the way it was before you move out, if you want your security deposit back. You don’t have the option to do any bigger renovation projects.
However, after you become a homeowner, all that changes. You own the place. You can alter it however you see fit. Whether that means adding a new coat of paint to the walls or knocking them out entirely to build a new layout. You call the shots.
4. You’re building equity
The last thing that’s different between buying and renting is that, when you buy, you have a chance to build up equity in your home. When you’re renting, the money that you put towards rent each month doesn’t do much more than guarantee you a place to live. However, when you own your home, the money that you pay into your mortgage each month goes toward building future wealth.
Equity refers to the percentage of your home that you own outright. Since most people need a mortgage in order to purchase a home, they don’t own it in full right away. Instead, the lender has a controlling interest in the property, which gets smaller as you pay off the mortgage. Eventually, you can use that value - or equity - that you’ve built up as an asset to help you finance other purchases. Whatever you choose to use it for, the sooner you buy, the sooner you can begin building a major asset.
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