Cleveland Real Estate News

Renting v. Owning a Home: exploring costs and benefits

Owning a home may seem overwhelming. You might feel you can’t afford to own. But can you afford NOT to? Read to learn more!

Renting or owning a home is a significant decision, and understanding the costs involved is crucial. Renting offers flexibility, while owning builds equity. Generally speaking, unless you travel frequently or tend to move often, home ownership is usually the better financial choice.

Let’s explore the real costs of both options.

Renting a Home:

  1. Monthly Rent: The primary expense varies based on location, size, and amenities.
  2. Security Deposit: Usually one or two months’ rent, refundable but subject to deductions for damages.
  3. Utilities: Renters may need to cover electricity, water, gas, and internet separately.
  4. Insurance: Renter’s insurance safeguards belongings from damage or theft. Many landlords require it.
  5. Maintenance: Minor repairs and upkeep may be the tenant’s responsibility. Check with the landlord to see what he is responsible for and what you are responsible for.
  6. Moving Costs: Hiring movers, packing supplies, and storage expenses can add up. Especially if you move often!

Owning a Home:

  1. Down Payment: An upfront cost impacting affordability and mortgage approval. This could be anywhere from 3%-20% of the purchase price of the home. However, you may be able to find down payment assistance or use gift money from a friend or family member.
  2. Mortgage Payments: Monthly payments based on the loan term, interest rate, and down payment. Typically, these are similar in amount to monthly rent payments, sometimes lower.
  3. Property Taxes: Homeowners pay taxes based on property values and local rates. Some counties have lower taxes than others, so check here for lowest property taxes.
  4. Homeowner’s Insurance: Coverage for structure and belongings against damages and liabilities. General this runs about $1000-$1500 annually for a standard sized home, and can be worked into your monthly mortgage payment.
  5. Maintenance: Homeowners are responsible for repairs, renovations, and routine upkeep. If you are handy, or know someone who is, this can save you money. But you definitely want to set some money aside each month for regular maintenance.
  6. Property Appreciation/Depreciation: Home values fluctuate, impacting equity and potential gains or losses. If you hold a property long enough, you typically will see an increase in value over the long haul.

Renting involves monthly rent, security deposits, utilities, insurance, maintenance, and moving costs. Owning requires a down payment, mortgage payments, property taxes, insurance, maintenance, and potential appreciation/depreciation. Consider these costs to make an informed decision. And as always, contact us if you need to learn more about home ownership.