Choosing between renting a home and being a homeowner is one of the most adult decisions one can make in their life. The choice you make can effect some of the choices you make in your life for the next ten to fifteen years—or longer depending how long it takes a homeowner to pay off their mortgage. Part of the American Dream is to own a house, right?—not so fast. This framework can sometimes turn individuals into debtor, money drained homeowners. Assuming those reading this are either perspective homeowners or renters, be sure to do your research before embarking on your journey to housing.
Renting vs. Owning: Costs
Probably the biggest deciding factor between whether to rent or buy is the cost difference. Generally, renting is by far a cheaper course of housing than home ownership. Of course, the price points of renting and owning will differ according to location, wanted amenities, structure, state of the real estate market, and much more.
Renting rates are usually very consistent, month to month—some rental owners will even give discounted rates during the holiday season. These rates will sometimes include utilities or sometimes will not. When renters first move in, their initial lease cost may shock them. Usually, landlords require first month’s rent, last month’s rent (to ensure the renter doesn’t just move out and not pay), and a security deposit. All these costs generally make your initial payment 3x more than your normal monthly rate—i.e. a normal monthly rate of $1,500 would be $4,000. Not to worry, the monthly rate will continue to be $1,500 every month afterward.
Buying a house is expensive—to say the least. Besides the down payment on your house, which can be 20 percent of the purchase price (that’s $1,725/month for a $150,000 home), you’ll most likely need to pay an agent to help navigate you through the home buying process, especially if it’s your first time. If you want a home closer to a big city, your out of pocket expenses will be even higher. Initial payments will include down payment, closing costs (most likely), and other miscellaneous fees. After your initial payments are made, your home will require monthly costs as well: mortgage payments (unless you’re some billionaire you can afford a house up front, but then again I guess you wouldn’t be reading this article if you were…), which include taxes and insurance. After these upfront payments, a house costing $150,000 will include, $4500 to $30,000 for the down payment, $0 to $12,000 for the closing costs, & $250 to $800 for miscellaneous costs. Making a total of $4750 to $43,800, according to findings in an article by Michael Bluejay.
Renting vs. Owning: What’s your timeline?
Depending where you are in your season of life, your need to settle down and buy a house may be further away than others. A good place to start in the renting vs. owning debate, is figuring out how long you will be in one place for. It is recommended that perspective homeowners only go through with the buying process if they will be living in the same house for 5 years to ensure they don’t lose any money. Rentals are beneficial to those wanting to live in various places for shorter periods of time.
Renting vs. Owning: Creative Freedom
One thing most people don’t think about when deciding whether to rent or buy/own, since they are so caught up in the stress of money and decision making, is their ability of whether or not they will be able to make their home theirs– in means of decorating, remodeling, painting, landscaping, and more.
Rental properties have rules and regulations in what you can and cannot do to the interior and exterior of the dwelling. The majority of landlords will only allow tenants to decorate with easy peel off wall decals, area rugs, and the plethora of other indoor décor on the market. Rental contracts usually always disclose this type of information, so double check before you sign to make sure it meets your needs.
Owning your own home on the other hand, gives you the freedom to do almost anything you want – excluding HOA rules, if applicable. Owners are able to paint, take down walls, remodel, put down new grass, plant flower beds, put in a pool, take out a pool, and whatever else your creativity may bring you. These rules may differ if you are in a neighborhood regulated by a Home Owners Association—HOA issues would probably only arise if you were trying to paint your house bright purple, but if you’re going for a nude beige, you’ll be alright.
Renting vs. Owning: Responsibilities
The beauty of renting is that all services done to the house (as long as they are not the tenant’s fault) are paid for by the landlord. Plumbing issues, leaks, weather damage, and even needing Drain-o, are the landlord’s responsibility—although, be sure to read your lease carefully to make sure you’re not being gypped. Obviously, renters are also responsible for paying their rent on time, as failing to may results in fees or even eviction in more intense cases.
When you are a homeowner, you are responsible for basically everything that happens in your home or on your property—excluding other people damaging your property, which may then turn into a whole legality fiasco. Of course, damages are what house insurance is for. The type of house insurance a homeowner has will affect how much out of pocket expenses will be made toward paying for the damages. Generally, the more expensive your insurance is, the better coverage you’ll have.
Now that you are completely overloaded with information, make a list of what your housing needs are, pertaining to responsibilities, time, freedom, and cost. Weigh whether your needs fall toward the renting or owning side, and the list will choose for itself.