Over 100 million Americans rent apartments or homes, but approximately 200 million people own homes.
Are you on the fence between renting vs. owning? If so, you’ll probably want to research the differences and benefits of each option before deciding which route to take.
You can reap benefits by owning a home, but you can also experience advantages when renting. Before you choose, you’ll need to compare several things to understand the differences.
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After that, you can make an informed decision whether you want to rent a place to live or buy a home.
The Commitment Required for Renting vs. Owning a Home
When you compare renting vs. owning a home, the first thing to consider is the commitment required with each choice.
Renting doesn’t require much of a commitment. You will need to agree to a one-year lease in most cases, but you can also find month-to-month units to rent.
Owning a home requires a much bigger commitment. When you buy a house, you own the property. If you ever decide to move out of the house, you will still have to make the mortgage payments.
Therefore, if you want to move to a different home, you will need to sell the house before moving or rent it out. If you choose to rent the home, you will instantly be a landlord.
If you decide to sell the home, you’ll have to find a buyer. You will also have to list the home and wait for someone to make an offer. After doing all of that, you will need to work toward closing on the property.
Buying a house requires more commitment than renting, but owning a home also gives you more freedom with the property.
The Cash You Need Upfront
The next thing to consider is the cash you will need upfront for renting vs. owning. In most cases, you can rent a place to live with much less money than buying a house.
The average cost of a two-bedroom rental in the U.S. is around $1,180 per month. To rent an apartment, you will typically pay the first month’s rental payment plus a security deposit.
The security deposit is usually equal to the monthly rental price. Therefore, to rent a place to live, you might need around $2,360 upfront to pay for the unit. You might also need a little more for utility deposits.
To buy a home, you will usually need at least 3.5% of the home’s purchase price. If you purchase a house for $150,000, you would need to come up with at least $5,250, and that is just for the down payment.
You would need money for other things, too. So, you can see that the upfront costs of renting will cost less than buying.
The Costs of Each Option
You might also want to compare the monthly costs of owning a home vs. renting. As mentioned, the average rental cost is $1,180.
If you buy a house for $150,000, your monthly payment might be around $716 with a 4% interest rate. You can use a rent vs. own calculator to determine house payment costs to learn more about the costs.
As you can see, though, the monthly payments for owning a house cost less than the average rental costs in this country. Owning a home does require paying more expenses, though, as you pay for the repairs the home needs.
You might also want to know the difference with where your money goes when renting vs. owning. When renting, your landlord gets all the money, and you do not build up any equity or investment of any type.
When you own your home, part of your monthly payments go toward your loan balance. As you pay money on your home, you build equity, and this equity is an investment.
The Maintenance Required With Each Choice
Another difference to consider is the maintenance required with renting vs. owning. When you own a house, you are responsible for every repair and maintenance task the home needs.
Owning means that you must fix everything that breaks. You must also buy appliances for the property, as you will not have a landlord providing these things.
You can also lookup appliances for leasing near Austin if you prefer renting your appliances. You can also lease furniture and other items from leasing businesses.
When you rent a place, you will not be responsible for the maintenance. If something breaks, you call your landlord. Your landlord will handle the repairs and maintenance your unit needs.
The Top Pros and Cons of Owning a Home
Now that you see some of the differences, let’s move on to the pros and cons of owning a home. Here are the top benefits:
- You have more freedom with the home
- You have more control over what you do with the home and how you use it
- Your monthly payments might be less
- You build equity in the house
- You receive tax advantages through homeownership write-offs
Here are some of the downsides to owning a home:
- You are responsible for all the repairs and maintenance
- You inherit a bigger commitment
- You cannot buy one if you cannot get approved for a mortgage loan
The Top Pros and Cons of Renting a Home
Next, let’s look at the advantages of renting vs. owning. Here are some of the pros of renting:
- You will not have to make a long-term commitment
- It is less costly to move into an apartment or home rental
- You will not have to deal with repairs and maintenance
Here are some of the drawbacks of renting:
- Your rental payments do not produce anything
- You will have a landlord that tells you what you can and cannot do
- You might pay more each month for rent than for a house payment
Think It Through Before Deciding
Now that you understand the differences between renting vs. owning, you can decide which is right for your life. Both options provide perks and benefits, but both also have drawbacks.
Did you enjoy this article? If so, check out the rest of our blog for more articles related to real estate.