As you decide where you want to live, you might consider renting a house as an option. This choice involves less of a commitment than buying a home as well as less of an upfront financial obligation. But the process of renting a home can also have some significant disadvantages, including the following:
You don’t build up any equity.
If you own a home and make mortgage payments each month, you’re building your equity, or interest in your home. The amount of your equity is determined by figuring out the difference between the appraised value of your home and the amount you still owe on your mortgage loans. This is considered to be one of the main benefits of homeownership. When you rent a home, however, you don’t build up any equity. If you rent a home for four years and then move somewhere else, you won’t have any equity to show for it, and this is often considered one of the main ways to build wealth.
You might have to leave on fairly short notice.
The homeowner decides when a home is sold, so if you’re renting, you have no control over the sale of the home. Its owner could decide to sell it, and you could be forced to move on short notice as a result. So even if you find yourself in a good situation and love where you live, the home could be sold, leaving you to find a new place to live.
You’ll have lots of restrictions.
When you own a home, you can do what you’d like with it as long as you don’t break the law or any neighborhood homeowners’ association rules. But when you rent, the owner probably will have a set of rules you’ll need to follow. You may not be able to put holes in the wall to hang paintings, paint the walls different colors or make other improvements. Your landlord can also keep you from having pets in the rental home, and you’ll lose the opportunity to personalize and improve the home and make it your own.
Your rent may keep rising.
A fixed-rate mortgage can keep your mortgage payment the same from month to month if you own your home. This helps your finances since you can count on what you’ll have to pay for your mortgage each month and as your pay rises, your mortgage will stay the same. On the other hand, if you rent a home your landlord can raise the rent whenever your lease is up (usually after six months or a year.) At this point, you’ll have only two options: pay the increase or find a new place to live. If you choose to stay, you may face multiple rent increases over time.
You probably don’t get any tax benefits.
Renters usually don’t get the same tax benefits that are available to homeowners. These include deducting property tax and real estate taxes. As a renter, you probably won’t be able to take advantage of these deductions, but homeowners usually can.
You’ll need to rely on your landlord.
Your landlord will be responsible for making repairs to your rental house. This can sometimes be an advantage since you won’t have to pay for and arrange the repairs yourself. But you may have a landlord who doesn’t take care of issues in a timely manner or does a shoddy job on repairs.
Before you decide on whether renting a house is for you, make sure to understand the disadvantages of choosing this option. You may find that you don’t enjoy renting because of restrictions and other problems that may ultimately cost yourself money over the long term.