BUYING A HOME
When you buy a home, lenders require a significant down payment, quite commonly around 20% of the mortgage amount. This down payment does give you immediate equity in the home, but unlike rent, it’s typically thousands of dollars. When you rent, you’re only required to put up a security deposit which is usually equal to one month’s rent. And that deposit is returned to you when you move out, provided you’ve kept the property in good shape.
When buying a home, your monthly mortgage payment may be less than a rental payment, but you’re responsible for all of the maintenance, repair, and upkeep costs. When you rent, your landlord is responsible for any repairs that come up, whether it’s a leaking roof, a broken appliance, water in your basement, or any other repair or replacement. These kinds of costs can be substantial, but when you rent, they aren’t your responsibility.
THE BENEFITS OF RENTING A HOME
Another benefit of renting is that you don’t have to pay property taxes as you do when you own a home. Not only can real estate taxes be substantial, amounting to several thousand dollars yearly, they are likely to go up every year. This can saddle you with an increasing financial burden. When you rent, you don’t incur that financial obligation.
You also have much more flexibility about where you live when you rent. Buying a home can be difficult, especially if there are no homes for sale in the area you want to live. On the other hand, you’ll find apartments in many parts of a city and probably in an area you’d like to live. If your circumstances change or you decide you want to move, it’s much more difficult to do that when you own a home. If you’re renting, you can change your living situation much more easily. You can also downsize or upsize when your lease is up.
Insurance for renters is much more affordable than a homeowner’s insurance policy. When you buy a home, your lender requires you to insure the property to protect their investment in your mortgage. According to Nerdwallet, the average cost of homeowner’s insurance in Michigan is $1,310 yearly, or $110 per month. On the other hand, renter’s insurance in Michigan is about $201, or $17 per month.
The other costs that are lower for renters are utility costs. Since apartments are usually smaller than houses, they are less costly to heat in the winter and keep cool in the summer. You’ll have lower electric or gas bills than you would in a large home. Also, many apartment complexes pay for your water, so that’s another cost savings, as well.
On a lighter note, many upscale and even midscale apartments have amenities that you’d have to pay for as a homeowner. These include in-ground swimming pools, fully-equipped fitness centers with modern exercise equipment, saunas, and showers. As a homeowner, these would be additional expenses you’d have to incur and put a drain on your finances. As a renter, you can enjoy these luxuries as part of your monthly rent at no additional cost.
So while there are distinct advantages to owning a home – building equity, a sense of stability and permanence – in many instances, renting can be a better choice, especially if you’re trying to improve your financial situation and don’t want to incur the costs of upkeep, taxes, insurance, etc. that come with owning a home. In that situation, waiting for the right time is the wisest choice.