Most people face the dilemma of either owning or renting a home. Both have their own advantages over the other, and have their own disadvantages as well. One of the things to consider in coming up with a decision is the cost involved in either owning or renting a house. Owning or renting a house is costly, but such cost can be minimized and returns or benefits can be maximized. Below are the costs to consider in both owning and renting a house.
Owning a house is by far one of the best investments that you can make. A house can be used as a money making machine by leasing or selling it (along with the appreciating lot) or it can keep you from paying regular payments such as rent. However, owning a house means that you are responsible for everything in it. If you’re still starting out, owning a house will require a down payment and monthly mortgage. This is by far the biggest financial obligation that you’ll have in owning a house. The bigger or nicer the house, the more expensive it is. Next cost of owning a house is insurance. Most lenders will actually require you to have an insurance first before you can get a mortgage. An insurance is a protection for your house just in case something happens. The average rate of premium for home insurance is around $1000 for a simple house. If you have a dream house, it will surely cost more than $1000, maybe at least $1500 in that case.
The next thing to consider after the mortgage and insurance is the property tax. Technically, everything is owned by the government thus if you use or purchase a lot and put a house on it, the government will charge you an amount which is called tax. The rate of property tax depend (generally) on these things: [1] tax rate in a certain location and [2] value of the property. The more expensive your property, the higher property tax you’re going to pay. Other costs or expenses to be considered are utilities and appliances. Once you have a home, you’ll beautify it and arrange it the way you want it, after all, it is where you’re going to stay and relax. Appliances and furniture are not cheap. An average household may spend more than $2000 on appliances and utilities alone.
The last things to consider are maintenance and the bills. Your house will deteriorate in time thus you’ll spend for either somebody to work on it or you’ll spend on the things that you’ll need in order to fix your house. Renovations are costly as well but may be necessary in the future. The bills on the other hand are regular payments that you’re going to pay for the electricity, water, and other utilities. These may not come in cheap as well especially if you have a huge group living in the house.
Renting on the other hand has lesser financial responsibilities and demands than owning. The first thing that you’ll have to consider in renting is the rent itself. Rent is being paid normally every month and the rate will depend on the location of the house.
Additional expenses that may come with renting are the utilities bills. You will be paying the utility bills that you’re consuming.
You can arrange with the property owner about the other expenses such as tax and insurance. There are some cases wherein the property tax and insurance are being passed to the one renting but there are some cases wherein the property owner handles such obligation. If the owner handles the tax and insurance payments, expect a higher rate for the rent. Normally, the owners handle the tax and insurance payments to avoid complications. It is their business after all.
The advantages of owning a house are [1] the property is yours, [2] it can be a good investment in the long run, [3] you can do whatever you want in your house, after all, it’s yours. Owning a house is ideal for people who are settled down already and whose lifestyle aren’t that mobile and moving from one place to another. The disadvantages though of owning a house are [1] too costly because of the financial obligations, [2] you own all financial obligations, [3] it may get too complicated especially the property tax part.
Renting on the other hand has its own advantages and disadvantages as well. The advantages of renting are [1] your primary responsibility is just paying the rent, bills, and taking good care of the property, [2] lesser financial obligations, and [3] you can easily leave if you need to. Renting is ideal for people who are starting out their careers and aren’t that financially capable of owning a house or people who are mobile. Renting is good in cities where the lifestyle is fast paced. The disadvantages of renting are [1] you don’t own the place you live in, [2] the owner has the right to kick you out, [3] you are liable for all properties in it.
Many people say that renting is just like wasting or throwing away money. However, owning a house may waste a lot of money as well. The best thing to do in coming up with a decision is first to assess your situation and learn if owning a house or renting one would be the better option. With properties sprouting out everywhere, there are a lot of cheap properties that you can find.
Keep in mind the advantages and disadvantages of owning and renting. It will help you a lot in coming up with the best decision.