There are many well-known advantages to owning your own home rather than renting. Houses usually increase in value over time, making owning a home a common long-term financial investment for the future. Mortgage payments are much more likely to have a fixed rate than tenancy agreements, which are subject to change and can often significantly increase with little warning! Not to mention, there is added privacy and a sense of community with owning your home that typically does not come with renting.
However, there are downsides to any financial path – and it is wise to be aware of the negatives as well as the positives of being a homeowner so that you can make an informed decision. Here are 5 negatives of owning, rather than renting a home.
1: Mortgage Payments
While mortgage payments are typically fixed, they can also be more expensive than paying monthly rent. They also don’t tend to include utility costs, which are included in monthly rent charges of many tenancy agreements – having to calculate and pay extra for essentials such as heating and electricity can add stress and uncertainty to maintaining your finances.
However, the interest and property tax portions of a mortgage payment are tax deductions, so there are two sides to everything!
2: Extra Costs
In addition to utilities, other costs are an important factor to be aware of when owning your own home. Property tax and home insurance (mortgage insurance, homeowner’s insurance, etc) are the big ones – yet unexpected events such as a burst pipe or broken boiler can result in significant costs paid for by the homeowner! When owning your home, keeping the property and its utilities well-maintained is your job, and nobody else’s.
3: Home Contents
Renting an already-furnished property is fairly easy and common. In comparison, buying a property typically means having to supply furniture and utilities yourself (and most mortgage lenders don’t offer loans on these). While this gives you more control over how to decorate and furnish your home, it also means that you need to pay significant costs for new furniture or pay removal costs to move your existing furniture into the new property.
4: The Housing Market is Unpredictable
The housing market is famously unpredictable. After the 2007 global financial crash, house prices across the world were severely affected. In the UK, the average house lost 20% of its value over 16 months. Over a decade later, the market is still recovering. Owning a home is not always the future-proof financial investment it may seem.
5: Long-Term Commitment
Owning a home is a long-term commitment. If you are not secure in your personal and professional lives, or not happy with the community that you live in, it may not be a wise choice. When renting, you can move away at very short notice (in cases of emergency such as sudden job loss, this especially useful), but this is significantly more difficult and complicated when you are a homeowner. On the other hand – while a mortgage is a long-term commitment, it is an investment in your future, whereas renting is not!
Ultimately, there are many pros and cons to buying or renting, and it is always essential to do your research before making the decision!