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Are you looking to move? Should you rent or buy? There are many factors to consider and the decision can only be yours. Renting has some marked advantages over buying, including the ability to move quickly, limited cash outlay, flexibility to downsize, and often a maintenance-free lifestyle. Below are 8 specific advantages of renting over buying:
1. Initial payment
- If you buy, you will likely need to deposit a significant amount of cash up front (usually around 20%). For a $ 200,000 home, that’s $ 40,000 plus other fees.
- The settlement cost and prepaid fees can add 2% to 5% to the purchase price of the home. Examples of settlement costs when buying include transfer tax that can range from 1% to 2.05% of the sale price, mortgage fees that can range from 1% to 2.5% (of the mortgage amount), insurance of title and registration fees that can be ½% of the sale price.
- Examples of prepaid fees when buying include legal, inspection, and home association fees.
- For a $ 200,000 home, these settlement costs and prepaid fees can add $ 4,000 to $ 10,000 to the cost of the home.
- If you rent, there is usually only a modest security deposit and the first month’s rent payable before moving into your new residence.
2. Moving speed
- Buying a home is a process that requires a lot of time and money. It can easily take several months to complete the home buying process.
- You should allow a lengthy pre-approval process with a bank or other financial institution (4-6 weeks). In addition, you should allow time for inspection, closing, and possible prior approval from the homeowners or condo association.
- With renting, you can find, apply, get approved, and move out in a matter of days to a couple of weeks.
3. Almost instantaneous mobility
- The standard lease terms for a rental are 12 months. With proper notice to your landlord (usually 60-90 days), you can pick it up and move in at the end of the 12 months without penalty. For a little more rent per month, you can generally get a shorter lease term. If you’re shopping and want to move, it can take many months (if not longer) to find a buyer. Also, when you sell a property, you are always subject to the risk of recovering not only the original sales price, but also the additional money you paid beyond the sales price for settlement costs (transfer tax, mortgage fees, property insurance). title, registration fees) and -Paid fees (legal, inspection, home association and other expenses).
- Also, when you are going to sell the house, you need to consider the cost of reselling, which generally includes a broker commission of 5-6% plus a transfer tax of 1% to 2% (depends on the locality).
- Even in a relatively strong housing market, it can be difficult to recoup these prepaid expenses in less than several years of ownership.
4.Maintenance included
- Things break down and need repair. If you buy, you are the owner and you are responsible for the repairs. Not only can minor problem repairs be expensive, but they are often time consuming. When something breaks, you will need to find, contact, and schedule reliable suppliers. While it is possible to find a company that can do a lot, you will find that you often need reliable specialists for heating / air conditioning, plumbing, roofing, pest control, and more.
- If you rent, the landlord and / or management company are generally responsible for maintenance and repairs.
5. Lawn care included
- When you buy, you are generally responsible for all lawn care, including lawn mowing, weed management, and any landscaping. This is tedious and expensive.
- In the winter, you may need to clear sidewalks and driveways of snow and ice.
- For the tenant, the cost of such a service is generally included in his rent.
6. Close to neighborhood / instant location
- By renting, you have an instant neighborhood of people around you and the possibility of many new friends with similar interests.
- Apartment communities, by nature, often promote social gatherings.
- Apartment complexes are often close to transportation routes and shopping, making commuting to and from work easier and entertainment more convenient.
7. Services included
- When you rent, you generally have the advantage of many amenities within the apartment complex, including a swimming pool, clubhouse, tennis courts, or a gym.
- When you own a home these are generally not included and often require special memberships at other probably expensive private clubs to enjoy.
8. The myth of buying a home as an investment
- For many years, buying a home was seen as an investment opportunity. The houses ‘only increased in value’, adding tens of thousands of dollars in profits.
- Unfortunately, this myth nearly destroyed 1 in 7 of a family’s lifetime savings in the 2007-2010 recession. Homes lost 20-30% of their value and were very difficult to resell or refinance.
- Buying a home may be the right choice for a family, but the decision to buy should not be based solely on being considered an investment opportunity.
