What it Will Cost to Rent vs. Own Your Home
What it Will Cost to Rent vs. Own Your Home
Should I rent a home, or should I buy one? There are a lot of factors to weigh when answering this question — and cost is one of the biggest.
Renting and owning each come with their own expenses and savings. And depending on your lifestyle and goals, you may decide you’re willing to accept some extra expenses. However, you shouldn’t go into that decision blindly. There are five key areas you should be looking at when it comes to calculating the cost of your home.
Renting: When you rent, your landlord is generally responsible for fixing or replacing anything that breaks. While you don't pay directly when the washing machine breaks, this cost is built into your monthly rent. These built-in costs often cause your rent payment to be higher than a mortgage payment.
Owning: If you own a home, you are solely responsible for fixing things when they break. The price a homeowner pays to repair things varies depending on the severity. Replacing a roof can cost $8,000, while a broken lock can cost $20. You’ll also pay for your everyday lawn care, pest control, and other regular maintenance.
Renting: Amenities vary widely across rentals. Some apartment complexes have gyms, community pools, and even free community events. Others have no amenities at all. Apartment amenities are usually included in your rental price and maintained by the property. However, if you rent a house with a pool or lawn, you may be responsible for the maintenance and upkeep. If you want to avoid those additional costs, be sure to ask about them before you sign a lease.
Owning: Depending on your neighborhood, you might have access to communal amenities. You may pay for these through homeowners association (HOA) fees or individual memberships. If you value amenities like a gym or pool, you should factor in these expenses when you look for a home. Otherwise, you can avoid these costs altogether.
Renting: If you rent, you will likely have lower utility costs than if you own. If you live in an apartment building, the management company pays for things like pest control, pool, lawn care, and even sometimes cable. Of course, you’re still paying for these services, but they’re bundled in your rent payment. Each rental company and landlord is different. Make sure you thoroughly read and understand the renter's responsibility outlined in the lease.
Owning: If you own a home, you must pay for water, internet, gas, electricity, and any other utilities directly. However, there are opportunities to save money. When it comes to internet or cable services, you’ll likely be able to choose your provider. You can also invest in energy-saving home improvements that will lower your utility bills.
Renting: There are no tax-related negatives or positives to renting. You won’t be able to claim any homeowner deductions, but you won’t have to pay any property taxes either. Some management companies will calculate these costs and average them into rent prices. However, they should never be an additional charge to you outside of your monthly rent.
Owning: As a homeowner, you will pay property taxes to your local government. How much you pay is determined by where you live and the value of your property. Many homeowners bundle them with their monthly mortgage payments so they pay a little bit at a time. But owning your home also has tax benefits. When you prepare your federal tax return, you can deduct mortgage interest and may be able to earn tax credits for homeowners.
Renting: Renters insurance is relatively inexpensive. It covers your personal property, repairs if you accidentally damage someone’s property, medical bills if you cause a guest’s injury, and additional living expenses in an emergency (e.g. you have to stay at a hotel because your building burned down). This is the only insurance you need as a renter.
Owning: If you’re taking out a mortgage, you’ll be required to get homeowners insurance. Depending on where you live (and what your lender requires), you may also need flood, hurricane, or earthquake insurance. You can generally save money by bundling your homeowners and auto insurance. Talk with an insurance agent about other ways to lower your bill.
Get Your Finances in Line
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