Renting vs. Owning: Which is Better for Your Wallet?
Renting vs. owning is often debated on, especially when it comes to which is a better option financially. Home ownership is generally considered cheaper than renting, besides the cost of having more responsibilities. However, the trend has been going in the other direction in many places throughout the country. Read on to see the financial aspects that will always be in the renter's favor vs. the home owner.
Lower maintenance costs
When owning a home, you’re responsible for the costs of things that break around the house, as well as general maintenance. When you rent, unless the damage is intentional or caused by negligence, it’s most covered by the property manager. For this reason, you’re going to spend almost nothing on maintenance and repair as a renter, while it can be a significant cost when you own your home.
Budget is more consistent month to month
You're going to have a more consistent budget month-to-month when you're renting vs. owning. The only cost related to your home that’s going to vary is utilities, which brings us to the next point of budget-friendly renting.
Some utilities are included in rent
Even the variation in utility costs can be taken away by some rental arrangements. Having utilities included in the rent can be cheaper. Even if it’s not, just the consistency month-to-month makes it easier to plan your budget when you're renting vs. owning.
Related: How to Save Money on Utilities
No HOA fees or dues
This one is small, but annoying nonetheless. Homeowner association fees are simply not a thing when renting vs. owning, and they can be a huge pain.
Renter’s insurance is cheaper
This is another one that’s small, but can add up. Renter’s insurance is generally around $15/month, while homeowner’s insurance is usually closer to $80/month.
Save or invest the down payment you don’t have to make
Now, we start to get into the big stuff. Buying a home requires a down payment, which is a substantial portion of the total buying price. The fees and deposits you pay when renting vs. owning are tiny in comparison. Instead, you can put that money into savings which can help your budget through difficult times, or investment it to grow your wealth.
Don’t have to pay property taxes
When renting, your landlord has to pay the property taxes. While the property tax rate is usually low, the value of a house is generally high enough that it adds up to a significant amount.
However, you do pay for property taxes indirectly when renting vs. owning. Part of your rent money is used by the landlord to pay these. Since it’s already priced into your monthly rent, it’s not an additional cost you need to to budget for.
Opportunity cost of not being able to move is huge
Moving as a renter is simple. You give notice to the property manager, choose to wait out the lease or pay the early termination fee and then find a new home. Difficult, but not impossible. If you own your home, moving requires selling. This leaves you with the risk of not finding a buyer or losing money on the sale, and makes it much more difficult to do things like move for a better job or downsize to save money. This opportunity cost can be hard to see, making it a real hidden cost of owning your home.
Every situation has its own specific details, but there are many places where renting vs. owning a home is good for your budget. Do you have any others? Let us know in the comments.