Whenever there’s a strong demand for housing, prices tend to rise, making the choice between renting or buying a real concern. What are the benefits of buying a home vs. renting a home?
Most young people begin their independent lives renting an apartment. As their careers and income build and they start families, most choose to buy a home. How do you know if you’re ready to buy a home? Here are some pros and cons of buying and renting a Colorado home.
Buying a Colorado Home
Advantages of buying a home:
- Building equity over time. This is one of the biggest differences between owning and renting a home. Each mortgage payment towards your home loan helps build your equity in your home.
- Tax benefits. Homeownership provides several benefits come tax season. Homeowners can deduct mortgage interest, property tax payments, and certain expenses from their income tax.
- Creative freedom. When you own your home, you don’t need to ask the landlord’s permission to hang photos, paint walls, or make the upgrade you want in your home. You are your own landlord!
- Putting down roots. Buying a home can help you feel more connected to a neighborhood. This sense of community can be incredibly valuable.
Costs associated with buying a Colorado home:
- Earnest money, down payment, appraisal/inspection fees, property taxes, insurance, closing costs
- Loan payments
- Utilities and monthly expenses
- Maintenance and upkeep (generally 1% of your home’s value annually)
- Furnishing, repairs, renovations
Renting a Colorado Home
Advantages of renting a home:
- Predictable expenses. You’ll can plan for rent expenses based on the terms in your lease.
- Flexibility. Renters can pick up and move easily if you don’t like your location or neighbors.
- Less risk. Because you don’t own the home, you have no risk or exposure in the real estate market.
- Easier to qualify with credit. Qualifying for a home loan is a more extensive process than renting a home.
Costs associated with renting a Colorado home:
- Security deposit
- First month’s rent
- Nonrefundable deposits
- Monthly expenses like utilities or internet, depending on the terms of your lease
Renting vs. buying is a personal choice based on your own situation. To have an in-depth conversation with an expert about your personal considerations, reach out to a local REALTOR®. Even if you’re not ready to buy a home, a real estate agent will be happy to talk to you, answer your questions about buying a home and the real estate market, and help you make an informed decision.
Originally published February 2020.