If you or someone you know is considering a residence change, the dilemma of whether to rent or buy is likely to have come up. For many people, a home is the most expensive purchase they’ll ever make, and particularly if it’s a question of first-time ownership, making the leap can be exciting, terrifying, or both.
It might seem like an easy choice on the surface. Why pay the same amount every month for a place to live that will never belong to you? Surprisingly, there are a number of reasons why renting may make more financial sense. Here are seven of the most common:
1. No Down Payment
If you can easily make a down payment on your home, cross this off the list of downsides — but many struggle to save up for this homebuying cost. A down payment gives buyers equity in the purchase and lowers monthly mortgage payments.
If you don’t have between 10 and 30 per cent of the property value in your bank account, on the other hand, or if pulling it out would put you in a tough spot, then renting is a better option. Renting does often require a move-in deposit (typically equal to one or two months’ rent), but it’s a one-time cost that the renter can generally recoup.
2. Investment Stability
When you buy a house, its market value should always be a consideration. This is true even if you don’t plan to resell, since any fluctuating values can still affect your mortgage and property tax. Renters don’t need to worry about the housing market; they get to bypass this problem completely.
3. Lower Insurance Costs
You should (and in many cases, are required to) insure your residence whether you’re renting or buying. The main difference is that homeowner’s insurance premiums are typically anywhere from five to seven times more expensive than renter’s insurance. The latter is also, generally speaking, more comprehensive, covering everything from break-ins to breakages.
4. No Property Tax
The amount and type of real estate tax a homeowner must pay depends on the property’s value and location. In most cases, however, it’s both unavoidable and expensive. With careful financial planning, it becomes just another aspect of owning your own home, but if money is the major factor in a home-buying decision, taxes like these represent a serious potential burden.
5. Affordable Utilities
Utilities like water, electricity, and the internet are more examples of considerations that both renters and buyers have to undertake. Financially, however, the advantage goes to renting, where the majority of residences are smaller and more efficiently built. This is especially the case in newer, multi-housing facilities, which are increasingly being developed with an emphasis on sustainability.
6. Zero-or-low Maintenance
Everyone experiences problems with their home, whether related to electrics, plumbing, fixtures, appliances, or one of the many other aspects of a living space. Homeowners are forced to deal with those problems personally — either by handling them on their own or by paying a professional. Renters have the luxury of leaving such problems at the feet of the property owner, which can easily add up to hundreds of pounds in savings per year.
Purchasing a home comes with quite a bit of finality. It’s possible to sell, renovate, or rent it out, of course, but all of those options come with their own risks and uncertainties. Renting, meanwhile, provides much more flexibility. Need to upsize, downsize, or have a fresh start? Renters can typically do any of the above on relatively short notice without facing any financial consequences.
Bonus Advantage: Amenities
Does a pool, sauna, or indoor gym sound nice? How about an enclosed parking space, a playground, or bicycle storage? Many rental apartments, condominiums, and townhomes include luxuries like these in the price of rent. Compared to what it would cost to install and maintain them at an owned home, they represent a huge monetary upside.
Current trends in real estate are further expanding the list of amenities that apartment dwellers can have access to. “Hometels,” for instance, are unlike anything most people have encountered. They consist of individual, fully equipped apartments (kitchens, appliances, split-level living, and more) that also come with all the benefits of a hotel stay: security, room service, cleaning, concierge, restaurants, coffee shops, bars, and additional conveniences.
Over time, owning a home can benefit the buyer and lead to a positive financial outcome. Renting, however, often delivers more value in the short term at a lower financial risk. As real estate developers increasingly build to the specifications of modern investors and consumers, renting may become an even more popular choice, but it remains important for individuals to weigh the options carefully based on their personal circumstances and long-term goals.