Is It Better To Rent An Apartment or Rent-To-Buy A Home?
If you aren’t ready to buy a home, then you’ll likely be faced with two options: rent an apartment or rent-to-buy a home.
Each option has its own pros and cons, so it’s important that you understand which might be better for you.
On the surface, rent-to-buy might seem like a better option if you would like to eventually own your own home, but this isn’t always the case.
Here are a few things to consider when deciding whether to rent an apartment or rent-to-buy a home.
What is Rent-to-Buy?
Rent-to-buy is pretty much exactly what it sounds like — instead of purchasing a home via financing, you start by renting the property with the option to eventually buy it.
More specifically, a rent-to-buy agreement typically has two parts: a lease agreement plus the option to purchase the property. Generally, the renter pays an upfront option fee — a lump sum which is used to essentially reserve the right to buy the property in the future.
Often, you’ll be required to pay extra money every month on top of your rent. This extra amount is set aside as credit that you can put towards the purchase of the house when your lease is over.
In most cases, you aren’t obligated to buy the house at the end of your lease. However, depending on your agreement, you may have to purchase the property whether or not you can afford it, so make sure the terms of your agreement are clear before signing anything.
Renting an Apartment: Pros & Cons
If you’ve ever rented an apartment before, you’re probably already familiar with many of the pros and cons, including:
- Inconsiderate neighbors
- Having to abide by community rules
- Less storage space
- You’ll never own the property
- Fluctuating rental rates
- Often more expensive than mortgage payments
These are just some of the many cons of renting an apartment; however, there are also several pros.
For example, while it can be considered a con that renting an apartment is a temporary solution, you could argue that it allows you to live comfortably without having to commit to one place long-term.
Additionally, you’re free of ownership responsibilities such as maintenance and renovations. Your monthly expenses will likely be more predictable and you’ll have access to a number of great amenities that you might not have when renting a home.
Rent-to-Buy: Pros & Cons
Rent-to-buy properties also have their own advantages and disadvantages.
These properties give you the same flexibility as renting an apartment. You’ll generally have the option to buy the property, but you won’t be required to. If you love the home, you can stay. If you hate it, you can move on.
This could also give you the ability to purchase a home if you aren’t currently able to get a reasonably-sized mortgage. While renting, you’ll also improve your credit. Lastly, you’ll avoid many of the cons of living in an apartment like loud neighbors and bad landlords.
On the other hand, rent-to-buy homes can lead to you losing money. In some cases, the seller has a right to refuse sale if you do not abide by the terms of your lease. For example, if you aren’t able to secure a mortgage when your lease ends, your seller can refuse to sell you the home and keep all of your rent credit.
Moreover, while renting, your home will likely depreciate in value; however, you will still have to pay the previously agreed upon amount if you choose to buy.
Rent-to-buy homes can be a good option for some people, but it’s important to consider your circumstances to decide which option is best for you. In many cases, you’ll find that renting an apartment makes the most financial sense if you aren’t ready to buy a home.