What I saved today

How I saved money, time or the environment today or recently. Relevant comments or questions are appreciated.

Sunday, April 29, 2012

Its often better to rent a home rather than own

When comparing the benefits of owning a home to owning one, there are a LOT of things to consider. One of the largest costs of buying and selling a home is real estate agent fees, which are typically 5 to 6 percent of the purchase price with a traditional realtor.  Mortgage fees (unless you can purchase the home without one) and closing costs will also add to the costs of buying and selling a home. If you don't plan on living in the home very long, these costs will seriously eat into what you might save by owning a home rather than renting.

Owning a home also means costs of maintenance and repairs and the tools to do the work if you DYI. You might also want a termite contract. If you own a home, you will likely buy and take many of your appliances with you if you move.  There's an added cost to move those, especially if you are going out of state. Renters don't have that problem. You also need to consider property taxes and the cost of home owner's insurance vs. renter's insurance. If you've got a mortgage, you're handing a bank the mortgage interest.

Another thing to consider is the aggravation factor.  Generally if you rent, you don't have to be home when a repairman comes, but you do if you own.  If you cut your own lawn and are away when it needs to be cut, you'll need to make arrangements. If you own and decide to move, you've got the hassle of selling your home. 

You will also want to keep a large emergency fund for things like replacing your roof or needing an exterminator.

On the other hand, if you own you don't have to deal with a landlord.  You can make modifications to your home if you own it. If you itemize deductions you can deduct mortgage interest on your taxes. Also, rent goes up, but your mortgage won't if you have an fixed rate. If you rent, you're not building equity and you don't have property to show for it. 


Written by Paul Michael and published on Wise Bread.


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