The weeks and months leading up to a wedding are exciting and jam-packed, but it can also be overwhelming. There are so many choices and decisions to consider and make. It’s true, however, that those choices and decisions don’t end after the couple says, “I do.” One of the biggest decisions to be made after a wedding is the choice of renting vs. buying a home.
The decision to rent or purchase a home is only one of many difficult money conversations to have before marriage. This decision, however, should be made early because of the financial and long-term implications each living situation places on a couple. The pros and cons of both renting and buying should be considered before the final decision is made.
A. Are you considering renting a place to live?
Renting is often the first step in a couples’ living situation. Renting a small house or condo seems to present flexibility and less commitment than purchasing a more permanent home.
Some couples look to other renting-type arrangements, like living with in-laws or parents. Each of these rental arrangements presents similar advantages and disadvantages that should be considered.
What are the advantages of renting?
The biggest advantage to renting is the short-term commitment and flexibility to travel or move. A rental term usually ranges between one to one-and-a-half years, and some properties can be rented for as little as a few months.
This kind of short-term commitment provides couples with a higher level of flexibility, which can be very appealing. Those who are looking to travel or live a more nomadic lifestyle will see renting as a viable option.
Renting can also provide access to amenities that are not always available when purchasing a home. Some rental properties offer renters access to workout facilities, pools and spas, or community spaces at no additional cost. This allows renters to save money on additional expenses and use that money elsewhere.
Rentals offer the renters additional benefits like little to no maintenance or repair responsibilities. In most instances, the owner of the rental property is responsible for all maintenance and upkeep. This means the renters are free to save money for other expenses or experiences and feel less stressed.
Perhaps most important is the financial aspects of renting. The overall financial commitment of a rental property is usually lower than the costs associated with buying a home. Most properties require a small deposit that is at least partially refundable. Renters can also enjoy lower insurance and utility costs, and there are no taxes associated with renting.
What are the disadvantages of renting?
As with most things in life, there are disadvantages to consider. Renting a property is no different. These disadvantages should be considered alongside the positive benefits before any final decision is made.
Many people consider renting to be a less desirable option because there is no return on investment. As a renter, there is no benefit to putting money into a property you do not own. There is no equity to be gained in renting. Similarly, a renter will not benefit from year-end tax deductions because they don’t own the property.
Renting can also be a bit unpredictable. There is a high likelihood that rent prices will increase at the end of each lease term. These increases are unavoidable and could force renters to move to other properties in search of lower rent.
Renting can also be restrictive — much more restrictive than owning a home. Many rental properties have restrictions on how renters can decorate.
In most cases, rental properties cannot be painted or remodeled, and any holes left by wall art must be repaired before the renters vacate the property. There can be other restrictions, including the number or breed of pets and noise restrictions.
B. Are you considering purchasing a home?
Purchasing a home is a big milestone for many couples. A new home presents new opportunities and fun, but there are some negative aspects as well.
The purchasing of a home comes with many responsibilities and additional financial burdens. Each couple must consider the good and the bad before signing those closing documents. And you should know (and agree) ahead of time on how these payments will be made. Are you splitting the bills 50/50?
What are the advantages of buying?
People most commonly opt for buying a home because of the potential equity. While there is no guarantee, buying a home does allow a couple to build equity into their home through repairs and improvements. Equity can then help a couple move toward future financial goals.
Costs associated with buying a home are usually more predictable and easier to control. There are few yearly or frequent increases in mortgage payments.
This means couples who purchase a home can more freely plan their finances. Homeowners can also benefit from more protection when they suffer from unforeseen circumstances that add financial strain, like job loss or terminal illness.
Homeownership also presents the opportunity to decorate and renovate. The property a couple of purchases is their property, so they can decide to paint or remodel without asking permission.
Couples can invest time and energy into their property and, in turn, their community. These are advantages couples are less likely to see in the world of renting.
What are the disadvantages of buying?
The disadvantages of buying a home are all linked to the long-term financial commitment represented by such a large purchase. There is less flexibility associated with owning a home.
Couples who buy a home can and often do travel, but less frequently. When a couple is ready to move on, they must go through the selling process rather than simply notifying rental property management.
Buying a home also puts all maintenance and repair responsibilities on the homeowner. These responsibilities are not only time-consuming but can present financial strain. These costs are also inevitable and unpredictable, so it’s best to have a small amount of savings ready to address any problems that may arise.
The upfront costs of purchasing a home are much higher than those associated with renting. As a couple prepares to buy a home, they have to consider the amount needed for a down payment, closing costs, and moving expenses. These are one-time costs but can pile up quickly.
Time to Consider Insurance
Regardless of the final decision, couples must consider their insurance coverage. Many insurance companies offer both rental and homeowner policies to help individuals protect themselves and their personal property.
After you and your new spouse decide on renting or owning, call your insurance company to understand your coverage and options.