Owning a home isn’t right for everyone. It may be a lifelong goal for many Americans but that doesn't mean it's for everyone. We're all in different situations in our lives and have different goals and priorities. For some people, renting might make more sense for their financial circumstances. And if you move or travel often, renting may be the logical decision. Here is a list of the seven main advantages of renting instead of buying a home.
1. More Flexibility
One of the biggest non-monetary advantages to renting is that renters have more flexibility. Renters can live practically anywhere, while homeowners are restricted to areas where they can afford to buy. Living in an expensive city like New York may be out of reach for most home buyers, but it is more feasible for renters. Although rents can be high in areas where home values are also high, renters are more likely to find an affordable monthly payment than home buyers.
Renters also have the flexibility to downsize to more affordable living spaces at the end of their lease. This kind of flexibility is especially beneficial for retirees who want a smaller alternative that matches their budget.
2. Fixed Housing Costs
Renters have a fixed rent amount for the span of the lease agreement. While landlords can raise the rent with notice, you are given leeway to budget more efficiently for the upcoming rent increase.
While some homeowners may have a fixed-rate mortgage which also allows for efficient budgeting, they usually have more unpredictable costs. Factors such as adjustable-rate mortgages (ARMs) can fluctuate, often resulting in rising mortgage payments due to higher interest charges. Property taxes, maintenance, and insurance are all variables that can increase costs for homeowners but don’t affect renters.
3. Lower Insurance Costs
While homeowners need to maintain a homeowners insurance policy, the equivalent for renters is a renter’s insurance policy. Renters insurance policy is much cheaper and covers nearly everything owned, including computers, furniture, and valuables. The average cost of renter’s insurance is $179 per year, while the average insurance policy for a homeowner costs $1,249 per year, according to a study by the Insurance Information Institute.
4. Lower Utility Costs
Although homes vary in size, they are typically larger than rental apartments. As a result, they are usually more costly to heat and also can have higher electric bills. Rental properties typically have a more compact and efficient floor plan, making them more affordable to heat and power than many houses.
5. Access to Amenities
Another financial benefit of renting is having access to amenities that would otherwise be a large expense. Luxuries such as an in-ground pool or a fitness center come standard at mid-scale to upscale apartment complexes with no additional charge to tenants. It's common to see rentals include amenities such as a fridge, stove, oven, as well as many other home appliances. These end up saving renters hundreds of dollars they otherwise would've spent to purchase, transport, install, set up, and maintain.
6. No Maintenance Costs or Repair Bills
When you rent a property, your landlord usually assumes full responsibility for all maintenance, improvement, and repairs. So if an appliance stops working or your roof starts to leak, then you contact the landlord who is required to fix or replace it. Homeowners, on the other hand, are responsible for all of their home repair, maintenance, and renovation costs. Depending on the task and whether multiple repairs are needed at the same time, it can get quite pricey.
7. No Down Payment
Another area where renters have a better financial deal is the up-front cost. Renters usually have to pay a security deposit that is equal to one month’s rent. And that's usually all. Plus, this deposit is returned to them when they move out, as long as they haven’t damaged the rental property.
When purchasing a home with a mortgage, you’re required to have a sizable down payment which is typically around 20% of the property’s value. To a homeowners defense, that down payment results in equity in the home, which only increases as the mortgage is gradually paid off. And once you've fully paid off your mortgage, you have a valuable investment that renters never attain. Still, the amount needed for a down payment on a home is significantly more than a rental security deposit. A 20% down payment on a $200,000 house is $40,000.
Everyone needs a place to call home, and buying a house isn't always the logical decision. Consider your current life situation, your priorities and goals, and use that to make the decision on whether buying a house or renting is better for you.
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