Should You Buy or Rent a House? Advantages and Disadvantages Explained Well

Nowadays it is not easy to decide whether to rent a house or buy one . In recent years, in fact, mortgages have become more expensive, property and rent prices have risen and continue to do so while salaries have remained almost the same. For these reasons, choosing whether to live in rent or buy a house has become more problematic. The choice also depends on factors such as the place where you live, your life project and above all the income you have. Let's see the pros and cons that can help you make a wise choice.

What are the advantages and disadvantages of buying a house

Buying a house is one of the main aspirations of many Italians even if, given the skyrocketing prices, realizing this dream has become very difficult.

The main advantages of doing this are:

• you can count on stable housing;
• you can have a fortune;
• you have the freedom to customize – you can renovate, furnish and modify it as you wish;
• you can access subsidized mortgages if you are young;
• you can get tax breaks for your first home;
• you have the possibility of generating passive income in the future by renting it out;
• it can be sold in the future and obtain a higher value if market prices are favorable;
• you are not subject to the payment of rent (now increasing);
• you can leave an inheritance to your family.

Buying a house nowadays can also be advantageous due to the effect of inflation . Investing in a real asset such as real estate can protect your capital because the value of such an asset tends to increase over time together with the cost of living.

However, there are also disadvantages in comparing houses such as:

• the interest rates if you decide to take out a mortgage;
• the need to make a down payment of at least 30% if you are buying a house and do not want a mortgage that is too long or having to provide guarantees;
• additional costs – for the notary, the agency, the investigation, the taxes and any appraisal;
• the risk of devaluation if you buy a house in certain geographical areas;
• ordinary and extraordinary maintenance costs, always paid by the owner even if the property is rented;
• the annual taxes to be paid such as IMU if it is a second home;
• the payment of the Tari;
• the long time to sell (in many cases);
• unexpected expenses such as system upgrades;
• the bond with the bank which can last up to 30 years and for which job stability is necessary.

Precisely for the points indicated above, buying a house, especially if you ask for a mortgage , is more suitable for those who have a solid economic condition and prospects of stability over time.

Is renting a house a good idea right now?

Buying a house as we have seen is one of the main objectives of Italians. Renting, however, can offer numerous advantages especially now, in an uncertain economic context, for the following reasons:

• you have the possibility to change house more easily based on your work and family needs;
• less money is needed at the beginning, since the deposit and one to three monthly payments are enough;
• there is no need to open a mortgage so you are not tied for years to a bank loan with variable interest rates;
• you have less maintenance responsibility – extraordinary expenses are the responsibility of the owner;
• you are not required to pay registration, land registry or mortgage taxes;
• you don't have to pay IMU;
• you can often put aside a small amount of money – in some cities renting a house costs less than paying for a mortgage;
• there is no risk if the property loses value;
• It is possible to evaluate the area before making the purchase.

In light of what has just been said, renting a house can therefore be convenient for young workers or those in transition. Also for families who cannot afford to ask for a mortgage.

Renting a house obviously also has some disadvantages that must be considered before opting for this choice, the main ones are:

• the inability to build equity – the money you spend on rent does not create real estate value;
• the risk that the rent may increase when the contract expires;
• the risk of being evicted at the end of the contract;
• the inability to modify the house as you wish;
• condominium fees can be significant;
• housing instability;
• the difficulty of obtaining long-term contracts, especially in large cities where short-term rentals are preferred also for tourism reasons;
• any costs for damages attributable to the tenant.

If you want flexibility, then renting can be very advantageous but if you are looking for stability and assets for the future then it is not the right choice.

Deductions for rental expenses

Those who live in rented accommodation can obtain tax breaks by deducting the rental costs in Form 730. However, the deduction is only possible if the property is intended as a first home and is for residential use.

In this case you will need:

• a rental agreement registered with the Revenue Agency;
• a contract compliant with the law as the one agreed;
• the registered residence in the property;
• an income subject to Irpef and in some cases also fall within certain income limits.

The deduction varies depending on the income you have and the type of contract and can range from 150 to 2,000 euros per year.

If you own a property that is rented out, you can pay less tax by choosing a contract with agreed rent or opting for the flat-rate tax. The first is subject to a rate of 10%, while the second is subject to a fixed rate of 21%.

How VAT works when buying a house

Finally, if you buy a property without VAT and you meet the requirements for a first home, as explained by the Revenue Agency, you are entitled to pay:

• a registration tax of 2% instead of 9%;
• a fixed mortgage tax of 50 euros;
• a fixed land registry tax of 50 euros.

If you buy a house from a company that sells with VAT , you will pay:

• VAT at 4% instead of 10;
• the registration tax of a fixed 200 euros;
• the mortgage tax of a fixed 200 euros;
• the land registry tax of a fixed 200 euros.

What is better today: renting or buying a house?

The answer to the question Is it better to rent or buy a house? in light of what has been said, therefore depends on individual, economic and territorial needs.

In any case, it would be preferable to buy a house if you have a certain job and family stability. Also, if you have the financial availability to be able to make a substantial advance for the purchase of the property so as not to take out a mortgage for too many years. And again, if you have the will to build a long-term wealth.

Buying a house is also convenient for those who want to stay in that particular place for a long time.

It would be better to rent a house if you are young or if you have an unstable income. Also, if you are looking for better job opportunities, perhaps in another city and you do not have enough savings.