People will often tell you that it makes more sense financially to buy a home than to rent one. However, this isn’t necessarily true. While investing in real estate will provide you with a valuable asset, it’s hardly cheaper than renting a home.
Yes, renting a home means you’re not building equity. However, not everyone is in a position to put down firm roots or take out a mortgage. Furthermore, if you’re looking to minimize your monthly expenses, renting is definitely the way to go.
But we don’t just expect you to take our word for it. Keep reading to learn about reducing costs by renting.
Mortgages Come With Interest
First, let’s take a look at monthly rent vs monthly mortgage payments. In some cases, rent will be higher for a home than what your monthly home loan payments would be. However, you need to look at the bigger picture.
Mortgages come with interest, and even low-interest rates add up quickly. For example, if you took out a $300,000 mortgage at 3.5% interest over 30 years, you would end up paying $184,968.26 in interest alone. Paying a slightly higher monthly expense for rent is much better than giving away almost $200K in interest fees.
No Closing Costs or Realtor Fees
Reducing costs by renting is easy when you consider the fact that buying a home comes with a ton of extra fees. Most realtors charge a 3% commission rate for their services. If you buy a $300,000 home, you would owe them $9,000.
Closing costs are also around 3%, making your total costs closer to $18K. While the seller sometimes pays these fees, it’s not guaranteed.
Landlords Often Pay for Utilities
If saving on monthly expenses is important to you, renting can help you eliminate or reduce your utility costs. Depending on the home you rent and your landlord, you might not have to pay for any of your utilities. In other cases, you and the landlord will split the utility costs.
If you were to buy a home, you would be 100% responsible for all utilities, services, HOA fees, and more.
No Maintenance or Repair Costs
One of the best things about renting a home is that you don’t have to handle repairs and maintenance. Not only will this save you time and frustration, but it will also help you reduce your monthly expenses.
The general rule of thumb is that homeowners should set aside 1% of their home’s value for yearly maintenance. Using the example above ($300,000), you would be paying $3,000 a year and that’s not including major/emergency repairs or renovations.
Moving to a New Home is Free
Finally, if you’re wondering, “Can rent save on monthly expenses?” consider the costs to move out of a home you own. As noted earlier, the seller typically covers realtor fees and closing costs.
But did you also know that the average home seller spends over $21k prepping their home for the market? When you rent, you can move out after your lease expires with no additional fees.
Want to Minimize Your Monthly Expenses?
As you can see, it can be much more affordable to rent a home rather than buy one. If you’re not ready to commit to a mortgage or put down roots, that’s okay.
Save money on your monthly expenses by renting an apartment. We completely understand and support your decision. Check out some of our available apartments for rent to see what you can find in your area.