Becoming a homeowner can be a daunting prospect. You have to figure out what kind of home you want, how much you can afford, and how to get a loan to buy your dream house. Once you move in, there’s maintenance, insurance, taxes, and other bills to consider.
Is buying a house all it’s cracked up to be? For some homeowners, it is, but there’s also nothing wrong with deciding you would prefer to rent. Here are some things that could make renting a smarter money move.
No down payment
Sure, you may need to save up some money for a security deposit and the first month’s rent, but that’s nothing compared to the chunk of cash you have to put down for a mortgage.
It’s beneficial for buyers to put down 20% of a home’s cost on closing day, which can be a large sum for many buyers to scrape together. Renting means less money to move in, leaving more in your bank account for other expenses.
No mortgage
A down payment is just the initial cash that you need for a mortgage. After you close on a house, you’ll have to start paying the rest of the loan. For most homeowners, that means being locked into a mortgage for 30 years.
A 30-year mortgage isn’t necessarily a bad thing, especially if you choose one of the best mortgage lenders, but it’s still a stressful decision.
No maintenance or repairs
Homeowners don’t always consider the cost of owning a home beyond the monthly mortgage payments, but there are plenty of hidden things that could pop up.
This can include emergency repairs, such as when your furnace stops working in the winter, or the air conditioner breaks in the summer. You’ll also have regular maintenance like gutter cleaning every year or weekly lawn maintenance.
It can be tough to afford those things when you may already be stretched thin due to your monthly mortgage payment.
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Fixed rent
When you sign a lease, you’re locking in a specific cost every month. Homeowners with adjustable-rate loans don’t have that luxury.
Even those with fixed-rate loans may have to contend with changes to their monthly mortgage bill in the form of expenses covered by their escrow account or other market adjustments.
No property tax hassle
Every year, millions of homeowners pay property taxes that might fund roads, parks, libraries, or schools in their area. Even if you’re lucky and pay off your mortgage, you can’t get out of paying taxes on the property.
If you’re renting, any potential property taxes are covered by your rent and handled by the owner of your property.
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No deprecation
Just as a car depreciates in value year after year, so does a house. The value of a home can be negatively affected by general wear and tear, a decline in schools or roads in the community, or higher property taxes.
Homeowners need to take all these factors into account when it comes to assessing the value of their property.
For renters, those issues fall on the shoulders of the landlord. Yes, the rental market does fluctuate as well, but renters have more flexibility to move depending on any changes in the economic situation.
Cheaper insurance
Homeowners generally pay more for insurance than renters, especially if their mortgage lender requires home insurance as part of the home loan. That can add up depending on the cost of the home and the contents inside.
While some renters purchase insurance as well, some companies offer an affordable option if you only need a small amount of coverage.
Amenities
Property owners want to entice renters to sign a lease with them, and amenities are a great way to bring in potential residents. That may mean a pool, business center, and package delivery service.
A building may even have a lounge with a coffee maker for complimentary coffee on your way out the door each morning.
No utility setup
Moving into a house means setting up your electricity, gas, and water. These utilities are typically regulated by different organizations, so you’ll need to sign up with each one to get the lights on or the hot water running.
For many renters, however, some or all utilities are folded into their monthly rent. You won’t have to set up all those accounts since the landlord has already done that for you.
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Easier to move
A 30-year loan locks homeowners into a certain neighborhood they can only get out of if they go through the process of selling their house.
Most rental leases only last one year with the potential to renew each year after that. This makes it easy to move from one area to another if you change jobs or just want to try living in a different part of town.
Flexibility with space
Renting also makes it easier to move to a bigger place if you need more space. With more people working from home, there’s also more need for an apartment or home with a dedicated office space or separate areas to live and work.
For homeowners, that may mean trying to move around furniture or repurpose non-office spaces into work rooms. For renters, it may just mean moving to a new space with an extra bedroom or finding an apartment building with a business center.
No HOAs
Homeowners Associations (HOAs), are becoming more popular, especially in certain housing markets around the country. As an owner, you may have to pay money to an HOA in exchange for amenities in your community. That can include landscaping, garbage pick-up, a community pool, or cable and internet access.
But HOAs may also have restrictive by-laws about what you can do to your property, such as regulations on paint colors or types of fencing allowed. As a homeowner in an HOA, if you’re not paying these fees or following the by-laws, it could cause major issues, including fines.
More money in the bank
As a renter, the money you save in property taxes and homeowners insurance can be used for other things.
Maybe you need to pay for a car or just want some extra cash for a vacation. Because renters don’t have their money tied up in a long-term mortgage loan, they could also put their extra money toward retirement or investments.
Quick move-in
If you need a place to live, and you need it soon, buying a house isn’t your best option. Once you have your offer accepted, it can take 30-45 days to finally close on the house. You also have to factor in any number of steps that could slow down the process, like an appraisal of the home or a detailed review of your finances by your lender.
Renting, however, can be finalized within one to three days and with much less paperwork, making it a great option for someone who may be moving on short notice.
Bottom line
While many people dream about owning their own home, being a homeowner isn’t the right answer for everybody. A smart homeowner move could be to take a look at your budget, personal lifestyle, and professional needs to determine if renting might be a better option right now.
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