As you think about where you want to live next, consider some of the risks and rewards of buying and renting. For many potential home buyers, one of the most important factors in their decision is the cost of owning a home vs. renting a home.
While both options are accompanied by their own set of expenses, your decision will largely depend on your finances and future goals. Owning a home is a great way to begin building wealth, and it will require some preparation and long-term commitment. Renting, however, can provide the freedom you need to determine your next steps, and begin planning your future as a homeowner.
To help you determine which option is right for you, we’ve put together a guide outlining what expenses you’ll need to prepare for in either situation.
What Expenses Are Required When Owning a Home?
Despite the long list of expenses, the pros of owning a home often outweigh the costs. As one of the pillars of “The American Dream,” homeownership is essential to building wealth and achieving many personal and financial goals. With the appropriate planning and an exceptional real estate agent, your dream of owning a home may be more attainable than you think.
These are some of the significant costs of owning a home:
- Down payment (3-20% of the home’s purchase price)
- Closing costs (3-6% of the home’s purchase price)
- Private mortgage insurance (applicable when your down payment is less than 20%)
- HOA fees
- Maintenance (landscaping, pest control, HVAC care, chimney sweeping, etc.)
- Repairs (plumbing, appliances, roof leaks, etc.)
- Home improvements (painting, kitchen/bathroom updates, etc.)
- Utilities (power, gas, internet, etc.)
- Homeowners Insurance
- Property taxes
- Monthly mortgage payment
Many of these costs will depend on the price, location, and size of your house. Additionally, from time to time, there are unexpected costs that accompany homeownership. From leaky toilets to leaky roofs, these unplanned projects can add up quickly. Therefore homeowners must set aside sufficient funds to cover all expected and unexpected costs.
What Expenses Are Associated With Renting?
Renting is a great housing option and has many benefits. According to Pew Research Center, in 2019, nearly 36% of the nation’s 122.8 million households were rented. Many Americans make this decision because, in the short term, it is cheaper to rent than to own. Renting does not require a down payment, often excludes quarterly or yearly HOA fees, and even allows you to choose between apartment communities, houses, and townhomes.
These are some of the major costs of renting:
- Security deposit
- Miscellaneous fees (pet, amenities, etc.)
- Lease breakage fees
- Monthly rent
- Renter’s insurance
- Utilities (power, gas, internet, etc.)
Most renters find peace of mind knowing they will not have to cover the costs of unexpected repairs. Plus, the absence of unplanned high costs can be a great way to save money towards a down payment and allow you the headspace to create an effective plan for a future home purchase.
Cost of Owning a Home vs. Renting: What You Need To Keep In Mind
At first glance, the expenses that come with owning a home may seem daunting. However, when comparing the cost of owning a home vs. renting, it’s essential to remember that the money spent on maintenance, repairs, and home improvements will increase your home’s value, and you’ll gain equity with every mortgage payment.
So, if you ever decide to sell your home, your equity will turn into money. On the contrary, renting does not offer this advantage. While you may not have to worry about spending money on repairs and major home improvements, you will not reap the benefits of home equity.
Begin the Search for Your Next Home With Our Experts!
If you’ve decided on owning vs. renting and want to move forward with finding your dream home to purchase, the team at BlueWest Properties can help you! Contact one of our experienced agents to learn more about the process of buying and begin the search for your next home.
No matter what you decide, our agents can help you find the ideal place for you, your family, and your lifestyle. Contact us to get started!