Looking to Buy a Home? Comparing the Costs of Renting versus Owning

There are clear differences when weighing the options of renting versus owning. Whichever decision you make will provide clear advantages, though you may achieve a different set of goals. It is important to consider not only the obvious differences, but as you set out to make the right choice, also look at the entire picture along with any unintended consequences that may result from your decision.

First time buyers typically graduate to ownership after leasing a home or apartment previously. Your rental experience will provide you good insight as you decide whether now is the right time to move forward into ownership. The act of purchasing a home will bring a whole new set of responsibilities you may not have considered as a renter, but must be evaluated.

Location

Don’t underestimate the advantage of a great living location. Finding an apartment near the beach or in a district where you work and play may not be difficult. However, finding a residence to own meeting the same criteria will often be impossible to afford. Settling for a home which is some distance away from your lifestyle will require more time for commuting and less time for living.

Costs, Knowns and Unknowns

No matter where you live, the costs are often a good percentage of your income. And, you will pay one way or another, whether it be a rental payment or mortgage payment. However, your rental payment is inclusive. Though you may have to pay utilities in addition to your rental amount, you are not charged separately for property taxes, insurance, interest, lawn care, snow removal, or any other type of financing fee, improvement or maintenance repair. A home purchase will immediately change your payment structure, and place you in total responsibility for every cost, known or unknown.

Sweat Equity vs. No Equity

Yes, the home ownership will be a challenge, especially at the beginning, and you may find yourself sweating through your weekends just to maintain it. But, millions of home owners persevere through this uncertainty in hopes of owning their home and finding it to be the best investment decision of their lives. After paying off your house, not only do you free yourself from the tether of monthly payment, but you now have a large percentage of your income which can be dedicated to another interest. Hopefully by this time the value of your home has increased and your hard work is now realized as the home’s equity is also standing should you decide to sell, refinance or mortgage some or all of it.

So, there are obvious advantages in each case. Either decision may appeal more or less to your situation and personality. Apartment living includes great opportunities which may be difficult or impossible to replicate in a home. But, purchasing your piece of the American dream may provide for financial freedom in the long term, and even greater stability for your current and future family.

Regardless, look carefully at any decision made, as the right decision should make solid financial sense and provide you with stable peace of mind. The wrong decision will prove costly and only add to the stress you’ll no doubt be experiencing.