Last year the New York Times published a calculator designed to help people figure out whether home ownership or home rentership was in their best financial interest. It’s pretty cool. You can decide how much you want to spend and then tell the calculator how long you plan to stay in the house. The calculator tells you how much you can expect to pay per month, what kind of down payment you’ll need to save up, etc. It compares that with the cost of renting and lays out all of the numbers for you.
It’s pretty neat.
The thing is, there is more to figuring out whether to rent or buy than just the numbers involved in your mortgage or monthly rent payments. A lot of factors come into play with both options and it is those factors that should decide whether or not you choose renting or buying. It shouldn’t only be about the mortgage payment. Here are the other things that you should consider.
How Much Space Do You Need?
If you don’t need or want a lot of extra space, renting is usually a better option. Apartments run smaller than houses do. If, however, you have a large family or just like having a lot of space in which to spread out, a house is better.
Do You Want Neighbors?
Unless you want to live out in the middle of nowhere, neighbors are going to happen. The real question is: how close do you want to be to those neighbors? Sure you can often find houses to rent, but most rentals are in buildings, plexes or complexes. This means that, more often than not, you are going to share a wall with someone (or many someones) else. Do you like the idea of having people living that close to you? More importantly, do you want to live with the chance of having to run into people in hallways and walkways on your way to your car or mailbox?
If you plan on living alone, having that close proximity to your neighbors can be a blessing. For example, there will always be someone to hear you if you yell for help. On the other hand, having to hear someone else’s terrible taste in music at 4 AM might not be your idea of a good time.
Are You Handy?
Perhaps the biggest benefit that renting provides over homeownership is that you very rarely have to pay for repairs or maintenance. If something breaks or goes wonky, you simply call your landlord and they send someone to fix or replace it. It’s part of your rental fee. As a homeowner, unless you’re good at fixing things yourself, you’ll have to hire someone to do that for you because as the experts at warn, ignoring a problem or trying to fix it yourself “will only result in more damage”. However, hiring a contractor can be expensive and homeowner’s insurance does not cover many repair costs. Speaking of which…
Everybody has to have insurance. Homeowners and Renters alike. On the whole, though, insuring a rental is much cheaper than insuring a home and its surrounding property. This is because, as Acceptance Insurance points out, the landlord has insured your building. Renters insurance is to cover the cost of damage done to your possessions if something happens to the building. As such, it usually runs much cheaper than the average homeowner’s policy.
How much control do you want or need to have over the space in which you live. Control is the primary advantage that home ownership offers over renting. When you own your home you can do whatever the heck you want to it, providing that something is allowed by your local zoning laws. As a renter, you usually have to follow strict rules set up by your landlord. These rules cover everything from what you can display in your windows to the paint on your walls. While it’s true that there are many landlords who don’t mind minor changes, like painting (you can always paint it back), most will probably have a cow if you try to, say, replace your own sink or refrigerator.
Deciding whether to rent or buy is as much about lifestyle as it is about numbers. One is not necessarily better than the other; they are simply different ways to live. This is why, even though it seems like a numbers game, it’s important to think about how you want to live as well as how much you can afford to pay.