Much of today’s financial advice tends to center around buying a home. Yes, homeowners experience various fiscal benefits, such as building equity and potentially earning a return if they sell the property. However, not everyone is ready to become a homeowner – nor is it the best option for all. Renting an apartment or home can provide a slew of financial perks – especially to younger members just starting out.
For example, one of the biggest benefits of renting is the lack of commitment. If you decide to switch jobs and move to a new part of town or out of state, the transition is much easier and cheaper for renters.
Here are ten reasons why renting might be the smarter financial move for you.
No Financing Required
Ask anyone buying a home, and they can tell you the process of becoming approved for a mortgage can be stressful and quite tedious. After all, buying a home is a significant financial investment – for the homebuyer and the lender.
As a renter, you can bypass worrying about loan approvals or interest rates. While you may have to wait a day or two for your new landlord’s background and credit check, the process is typically quick and easy. As long as you can afford to pay the security deposit and monthly rent, you’re all set.
No Property Taxes
Property taxes can make up a significant portion of your monthly payment when you purchase a home. Depending on where you live, these taxes can be as much as $10,000 per year. Plus, property taxes typically increase annually, causing your monthly mortgage payment to increase yearly.
Renters are not responsible for paying property taxes. Instead, that responsibility falls on the shoulders of the landlord or property owner.
Lower Upfront Costs
One of the greatest hurdles for many would-be homeowners is the upfront costs. Between closing costs and down payment, these expenses could run into the tens of thousands of dollars or more.
In contrast, the only upfront cost renters usually experience is a one-time security deposit. Most security deposits are typically equal to one month’s rent. As long as you leave the rental in good condition, these funds should be returned to you upon moving out.
No Maintenance or Repair Costs
Many new homeowners underestimate the costs of maintenance and repairs on a home. Whether it’s a faulty A/C unit or a broken appliance, these expenses can add up fast.
However, as a renter, you are not responsible for these items. Instead, you can enjoy the convenience of a landlord who will take care of any home repairs or necessary maintenance.
Lower Insurance Costs
Depending on the property’s size, value, and location, homeowner’s insurance can be costly. And, with property values on the rise, insurance costs are also increasing.
As a renter, your landlord is responsible for maintaining the homeowner’s insurance on the property. While it’s not required, it is highly recommended that you opt for renter’s insurance. This coverage is typically inexpensive and will cover your belongings in the case of theft or fire.
Lower Utility Costs
Renters typically have lower utility costs compared to homeowners. Often, renters may have some utilities such as water included in their monthly rent.
Homeowners, on the other hand, typically encounter more expensive utility costs. For example, the water bill may be higher due to watering the lawn regularly. Renters will not normally experience these extra costs.
One of the most significant financial perks of renting an apartment or home is the lack of commitment. While your lease may be for a designated period, such as a year, you’re free to leave afterward. If you get a new job and need to move to another part of town or a different state, the transition is quite simple.
For homeowners, the process is more involved, costly, and time-consuming. Homeowners typically have to work with a real estate agent to list their home, find a buyer, close on the house, and find a new place to live.
Many apartment complexes today are more like mini resorts. With pools, fitness centers, clubhouses, game rooms, and dog parks on property, renters experience extra luxuries they would otherwise have to pay to access.
Buying a home can be a risky financial investment and particularly expensive, depending on where the house is located. As a renter, you can live in the area you want without being financially tied down to the property.
For example, you may choose to live in an up-and-coming area where it is very expensive to buy but affordable to rent. If that area doesn’t pan out, you can always move at the end of your lease. On the other hand, a homeowner will likely have to hold on to the property until values increase again or choose a more affordable area altogether.
Having roommates as a renter is a great way to cut down on monthly expenses – both in rent and utilities. It’s relatively low risk as well. If you sign the lease and the roommate doesn’t work out, you can always ask them to move out. Also, it’s an excellent way to make new connections if you’re living in a new city.
We’re Here to Help!
While buying a home has many financial perks, it also comes with added costs, responsibilities, and commitments. Renting is more flexible, affordable in the short-term, and often includes extra perks like amenities.
When deciding whether renting or buying is right for you, it often helps to discuss your options with a mortgage specialist. Our team is happy to answer all your questions, walk you through the home-buying process, and help you determine which option better aligns with your financial goals.
To speak with a team member, contact us or stop by any of our convenient branch locations.
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Each individual’s financial situation is unique. We encourage you to contact United Texas Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.