10 Reasons Why Renting May Just Be Better
- December 16, 2021
- by Angela
Many people think that when they buy a house life is magically better. After all, homeownership is the “American Dream”... In reality homeownership isn’t all positives. Do you know the reasons why it is better to rent a house vs buy it? You will get the answer to this question below.
You don’t have to worry about maintenance
When you are renting you have zero obligation to pay for problems such as roof leaks, broken appliances, busted pipes, pests, clogged drains, dead trees, etc. That is all the landlord's obligation. If the stove or heating is out you may be legally protected from paying rent until it is fixed.
The flip side is homeowners are forced into shelling out a lot of money on repairs, known as “the joys of homeownership” among the initiated. So one big advantage of renting is that you don't have to worry about paying for (or carrying out) expensive repairs. Free repair services are part of the deal when you pay rent.
You’re not stuck
When you decide to buy a house, most first-time buyers take out a mortgage. Did you know that the word mortgage translates to “death pledge” in Latin? Paying down a big loan for 30 years can certainly make you feel stuck.
There are also costs to selling a home (real estate agent, title insurance, closing costs, etc) which are usually about 10% of the sale price. That is a lot of money to give up just to get a different address. In a down market buyers can find themselves underwater (owing more on the loan than the house is worth) which means they literally cannot sell unless they come up with the difference.
Renting is a different story. If you don’t like the place you can move out relatively easily. Most rental properties have an annual lease or are simply month to month. If you need to move due to a change of job or some other reason, you will do it much easier if you live in a rented apartment or house.
Did you know that many residential complexes offer certain benefits if you live there as a tenant? This can include off-street parking, swimming pools, gyms, recreation rooms, etc. all free of charge. The reality is the cost of these amenities is rolled into your rent, but it can also be used as a way to attract rents to the complex.
On the other hand, you pay to have amenities as a homeowner. Some condos offer amenities, but the fee is included in the home owner’s association fees (HOAs) which you would be paying directly each month.
No property tax
When you own a condo or house you should pay property tax. If you have a mortgage the property taxes are rolled into your mortgage payment. The balance is held in an escrow account which the bank then pays for you each year when it comes due. The reason they do this is that the bank does not want to be on the hook for back taxes in case you default on the property.
On the other hand, when you are a tenant you do not have to worry about taxes. The property taxes are paid by the landlord. Tenants indirectly pay real estate taxes as a portion of their rent, but it is not as noticeable.
No HUGE down payment
When you buy a house, get ready to put down a lot of money. A down payment may be one of the biggest expenses of your life. Typically lenders want to see 20% of the total price of the house as a down payment to get the best interest rate. So if a home is $500,000, you would need $100,000 in cash to close the loan. However, there are loan programs where you can get away with just 10% down or even less depending on your credit score and circumstances.
When renting a house or apartment all you need to pay upfront is a security deposit, the first month’s rent, and possibly the last month’s rent. Getting into a rental requires a small fraction of the money it takes compared to a down payment on a home.
Given the example of the $500,000 house with a $100,000 down payment, that leaves a $400,000 loan balance. That is quite a bit of money to owe to the bank.
Renters do not have to worry about going into debt as rent is paid month to month.
Property value is not a concern
When you own a house it can be fun to check on the value when the market is going up. It can also be a worry when prices drop and you could end up underwater on your mortgage.
When you are a tenant you do not worry about the value of the house or apartment in which you live. That is the landlord’s problem (or benefit if prices are rising).
When you have your own house, the monthly costs can vary. Maintenance surprises can and do pop up out of nowhere, which is where an emergency fund comes in. Your mortgage payment could go up as well if you have an adjustable-rate mortgage.
Homeowners have to budget for additional items that may or may not happen. That makes renting easier for budgeting. When you are a tenant you have a fixed rent that you pay every month. The landlord can change the price when the lease expires, or after a given period depending on your area, but the point is you will always know how much you pay per month for the rent.
Much lower utility costs
When you are renting the landlord typically covers garbage, yard maintenance, and possibly water, internet, etc. Since apartments are generally smaller than homes they heat up or cool down faster as well. This can be a significant monthly saving for your budget in the utilities category.
When you own a home dealing with maintenance and upgrades can take up a lot of your time. When renting you have more freedom to have fun and do things you enjoy. Home maintenance projects can be fun sometimes, like building a garden, but not all home maintenance projects are equally rewarding.
When you are a tenant you can save a lot more money than when you own a house or an apartment because then your costs are much higher. It is up to you to decide whether you will be a tenant or a homeowner.
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