Your dream home comes with the upgrades and features you’ve always imagined in a house, ranging from stainless steel appliances to hardwood floors to that enviable outdoor space. However, chances are your dream house isn’t in your budget, and the upkeep of a home might be more than you can afford. Renting has a number of financial advantages over buying, especially when you’re living on a strict budget.
1. Budgeting Simplicity
When you rent, you know what you have to pay every month. Your lease clearly outlines your monthly rent, and the expenses stop there. When you buy, you do have that scheduled monthly mortgage payment, but that’s just the start of your expenses. The rest of your housing expenses aren’t consistent, so it can be challenging to budget for them. During the spring and summer, you might hire a lawn care company to mow your lawn. Your dishwasher might need a repair, or you might need to replace your air conditioning unit. When these expenses occur cannot be predicted, so you’ll have to tuck some money away every month to prepare for these costs associated with home ownership. When you rent, you don’t have to worry about these expenses.
2. Maintenance Costs
Maintaining a home can be expensive, and you can forget those expenses when you rent. Your lease will stipulate precisely how your landlord will handle any maintenance issues. While you might be responsible for some upkeep, such as replacing air filters or weeding the planting area, your landlord will take care of any major maintenance issues. So, when your refrigerator dies or your toilet won’t stop running, your landlord will fix these issues at no cost to you.
3. No Down Payment or Closing Costs
Buying a house means more than just finding a lender to give you a mortgage. It also requires a sizeable down payment of at least 5 percent of the house price — although 20 percent is recommended — along with the fees and closing costs associated with the purchase of the house. These financial obligations can add up to tens of thousands of dollars quickly. When you rent, you might owe your first and last month’s rent when you sign your lease and possibly a security deposit. However, these expenses a just a fraction of what you’d pay if you bought a home.
4. Lower Moving Costs
When you rent, you can pick up and move fairly easily. You can wait until the end of your lease term, and you won’t incur any moving-related expenses. Even if you need to move before your lease ends, the costs are usually reasonable, such as a couple months’ rent, and allow you to terminate the lease early. If you buy a home and then suddenly need to move, you’ll be hit with some financial losses. You won’t recoup those closing costs, and your home’s value likely will not have appreciated enough for you to make much money, if any, on the sale of the home. Plus, there’s always a risk that the home doesn’t sell, and you’re stuck with a mortgage for a home you are no longer living in.
Buying a home might be the American dream, but renting offers a host of financial advantages as well. For many individuals, renting is a cheaper alternative to buying, providing a short-term, flexible housing option.