(GivenUs.com) – Renting has become increasingly popular among young Americans. A 2016 study found that 65% of household heads under 35 years old were renters, compared to 57% just 10 years earlier. Meanwhile, many people might consider renting a more affordable and practical option than buying a home. But is this really the case? That may depend on your personal needs and goals.
Increasing Financial Challenges of Buying
Homeownership seems like the pinnacle of adulthood. It represents stability and comfort, and it gives you more control to do exactly what you want with your living space. According to a survey, over 70% of renters hoped to own a home, but many felt financially unequipped to buy.
Renting can be the cheaper option — but not always. It depends on a variety of factors, such as where you live, how long you plan to stay and whether you can afford a down payment. On the surface, the cost of a rental and a mortgage might seem pretty similar, with the national medians for both settling around $1,100. But the reality is a little more complex.
Today, what often scares people away from buying homes is the down payment. Most organizations require at least a 3 percent down payment (much more in some cases) which can add up quickly depending on the sticker price of the home. For example, you’ll probably need to save up at least $6,000 if you want to buy a $200,000 house.
Other points to consider include interest rates and other expenses that come with homeownership. While the average mortgage rate in the US is just between 3% and 4%, you’ll still have to factor in property taxes and other major costs like emergency repairs.
Meanwhile, renting comes with no major down payment and probably won’t force you to pay for big repairs. The issue is that while most mortgages offer a fixed rate, rental providers can change their prices at any time. You’ll also still likely need to pay for most, if not all, utilities yourself on top of the rent.
The Pros and Cons
Whether renting or buying is the better option for you may depend heavily on where you live. Homes in southern and midwestern states are usually cheaper, for example, with median prices ranging between $150,000 and $250,000. On the other hand, if you want to live in a place like Seattle, Washington D.C. or San Diego, homes might average $500,000 or more.
Buying a house can be a great option if you’re looking to settle down and start a family. You’ll get the most worth out of a home you buy by staying longer, and in some cases, the property value could increase over time. Owning property also gives you the opportunity to build up equity.
If you enjoy greater flexibility and want to lower repair costs, renting could be the more affordable option. You’ll forego the down payment and have a landlord to take care of maintenance and repairs. This could save thousands of dollars a year depending on what needs to be done. It’s also much easier to move out of a rental than a home you own, so it might be the better choice if you’re not planning to settle down.
Deciding whether to rent or buy a house is a complex decision, and you should factor in your current location, financial situation and long-term plans. By considering these basics and taking a look at your options in the area, you may be more likely to find a home that fits your budget.
~Here’s to Your Success!
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