Learning about the cost of renting and the expense of buying is the first step in creating a budget that works and deciding on the option that best fits the financial abilities and goals of the individual or family. Deciding whether to rent or buy has a wide range of factors to consider. Among the most important aspects of the decision is budgeting. Consumers who are weighing the differences between buying and renting need to consider the costs associated with both options.
Before buying a home, consumers must understand the full costs associated with the purchase. According to Andrea Murad of Fox Business, the cost of buying a home includes much more than just the mortgage payment. Murad points out that homeowners will inevitably need to consider other living costs such as property taxes and insurance expenses.
As a general rule, homeowners should expect to pay around 30 percent more than the mortgage in other home-related expenses on a monthly basis. This does not include the living costs like utilities, but rather the additional cost of taxes, insurance, HOA fees and maintenance expenses.
Buyers need to consider all financial aspects before making the long-term commitment of home ownership. Buying a home requires thinking about the future and planning around worst-case scenarios, because it might not be possible to sell the house immediately if the unexpected occurs.
Beyond the actual cost of rent, it is important to factor in renters insurance. Many renters overlook the cost of insurance, but some contracts will suggest or even require purchasing the insurance to avoid complications if a break-in occurs or items are stolen. Renters need to consider whether to pay this additional expense before determining if it is really less expensive. To find this information, some websites, such as Kemper.com, provide insurance quotes, which makes it easier to find a policy within your budget.
Renters have different budgeting considerations than homeowners, because the commitment to a property is much shorter. Depending on the location and the cost of living in the area, the expense of renting may or may not have a higher cost than purchasing a home. Consumers should always take time to research the market in the area to determine the full cost of renting.
According to Tara Siegel Bernard of the New York Times, a major factor that influences individuals to rent instead of buy is the expected difference in cost. Many renters feel that homeownership is too expensive when compared to renting because it comes with the added costs of maintenance and taxes.
While renters do have fewer expenses when it comes to maintaining the property, many do not factor in all of the costs associated with renting a property. In many cases, renters are expected to pay a deposit before moving into the property. The renters must pay their rent, which may or may not include utilities depending on the particular contract.
The market conditions will always play a role in the cost. In a location with a high rate of renters, the cost of renting is much higher than many might expect. Some areas are actually less expensive to buy due to the market conditions. While the market plays a role, in most areas the cost of renting is likely to become a little less expensive than buying.
Deciding whether to rent or buy will require some research. Looking at the market conditions and considering all of the expenses is vital to making a final decision between buying and renting.