3 Reasons Why Renting is Better Than Buying
Asking yourself the question, “Should I rent or buy a house?” Realtor magazine reports that the majority of adults in the U.S.. believe homeownership is still the hallmark of the American dream. You get an education, work hard, land a good job, get married, buy a house, start a family, buy a bigger house, accumulating wealth in your home that you can pass on to your kids, who will be better off than you. But is that the reality today?
Many people face challenges when it comes to achieving that, with things changing a lot over the past 60 or 70 years. From today's high home prices to come up with a big down payment and closing costs, oftentimes, renting can actually be better than buying. Here's why.
Lower Upfront, Monthly, and Yearly Costs
The down payment and closing costs alone can take years to save up for. The general advice has been to put down 20 percent, and with the average cost of a home in the U.S.. nearly $300,000, that's $60,000 plus the closing costs, which can be anywhere from $6,000 to $15,000. That means coming up to $66,000 to $75,000 just to move in. Even if you can get a loan with a down payment that's half that, you're still looking at as much as $45,000. You'll also have to make your monthly mortgage payment, pay for homeowners' insurance and property taxes, which can be thousands of dollars a year. The cost of maintaining a home isn't cheap either, and you never know when you're going to have to shell out money for repairs.
When you're renting, most landlords require the first and last month's rent plus a deposit, far less than that potential $75,000 cost to move in. Plus, renters' insurance is usually a lot less than homeowners' insurance, which is required by mortgage lenders, and there's no paying annual property taxes either. In most cases, when the roof starts to leak or something breaks down, all you'll have to do is call your landlord, who will be responsible for taking care of those repairs.
When you own your own home, if you get a job offer in another state or meet the love of your life who lives thousands of miles away, you can't just pick up and move. When renting, you'll have more flexibility without that long-term commitment beyond the rental contract you've signed. You might even be able to find someone to take over the lease. As a homeowner, you'll have to put your home up for sale, hoping that it sells quickly for a reasonable price that doesn't leave you in the red financially. If all doesn't go as planned, you could end up paying two mortgage payments or being stuck where you are.
When renting an apartment or a condo, you'll probably get quite a few amenities to take advantage of. Many complexes include features like a swimming pool, hot tub, and gym that come with no additional cost other than your monthly rent. While you might get amenities when purchasing a condo, they often come with monthly fees. If you buy a house, adding luxury items like a pool is extremely expensive, from the installation to maintenance, which can add up to thousands of dollars.
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