For several people, the American dream is to own their own home. While owning a home has several benefits, for some people it's cheaper to rent a place instead of trying to buy one. Here are 5 reasons why renting may be cheaper than buying.
- Flexibility: If you choose to rent, you can do a month to month lease or a 1 year lease. If you have a job that requires you to relocate every few years, you can save money by signing a 1 year lease instead of signing for a 15 or 30 year mortgage. If you move too soon after purchasing a home, you could loose money.
- Cost less: Buying a house can be expensive. When buying a home you have to pay for home appraisal fees, lawyer fees, closing cost, and other cost. It is estimated that home buyers need at least 5-10% more money to buy a home than renters need to rent a place. If you don't have the money saved for a good down payment or if you have other financial obligations, it may be cheaper and make more financial sense to rent.
- No maintenance fees: When you rent a place and you have structural problems (plumbing problems, stove breaks, heat/AC system stops working) the landlord has the responsibly of fixing the problem. When you own your home, structural maintenance and repairs are your responsibility. Maintaining a home can cost thousands of dollars a year. Those dollars could be saved or spent elsewhere if you decide to rent instead of buy.
- No property tax: Lot's of people don't take into account property tax when they purchase a home. Property tax varies widely depending on where you live. The average property tax rate is 1.19%. If you choose to rent, that is a fee you won't have to pay.
- Some utilities maybe included: Sometimes when you rent you can get some utilities (water, electricity, cable) included in your monthly rent. When you buy, no utilities are included in your mortgage. If utilities are included hundreds of dollars can be saved a month.