Look at the costs and benefits when evaluating if it’s best for you to rent or buy your home.

Whether it’s better to rent or own your home is a complex decision. Comparing monthly lease payments with mortgage payments is just the start. Here are other expenses and benefits to consider.

Overall costs of renting vs. owning a home

Start your evaluation by assessing the costs and seeing how they align with your income.

Renters have an advantage over homeowners when it comes to planning for expenses. The maximum a renter pays each month is the total of rent plus utilities and insurance. For a homeowner, the minimum is their mortgage plus utilities and insurance.

Reasons homeowners spend more cash include:

• Maintenance, indoors and outside (including lawn care and snow removal)
• Repairs
• Appliance replacements
• Maintaining structural integrity (for example, keeping the roof and windows in good repair or replacing them)
• Décor
• Upgrades

Homeowners must be prepared financially for the upkeep of their home.

Renters must be prepared for moving expenses if they decide to live elsewhere or a lease isn’t renewed.

Insurance costs

Homeowners insurance has a much bigger impact on personal budgets than renters insurance. In Michigan, the average renters insurance premium per year is $247 while homeowners pay $2,150 on average each year to insure their homes, reports MarketWatch.

How the average cost of utilities for a home compare to an apartment

The wide variety of homes makes it difficult to do an apples-to-apples comparison of average utility costs when renting an apartment versus owning a home. The age of a home, insulation, window condition and appliance efficiency are some of the biggest variables. A well-insulated home with energy-efficient appliances may actually use less energy than a poorly sealed apartment with older appliances that consume more energy.

In Michigan, average monthly utility costs are $411 (including $143 for energy), according to Smart Asset. When selecting a home, keep in mind that increased square feet will mean more air to heat or cool. Also, homeowners typically use additional water to keep up lawns and landscaping.

Property taxes

As a renter, a portion of your rent is used by the landlord to pay property taxes and there’s no additional bill. Homeowners are directly responsible for property tax payments.

Tax rates vary by location, but all residential property taxes are calculated based on the market value of a home. The higher the value, the higher the property tax will be. And, property taxes often increase year-to-year.

Mortgage closing costs

The cost of making a rental application may be as low as $35. Homebuyers who finance their home with a mortgage should expect to pay 2% to 5% of the purchase price in closing costs. (See what’s included in closing costs.) However, homebuyers don’t have to pay the costs up front; closing costs can be rolled into the mortgage.

For many, the benefits of home ownership are worth it

In the short term, renting often costs less than owning a home. Yet many people find that the benefits of home ownership are worth the investment, especially if they plan on staying in the same place for several years. That’s because home ownership provides an opportunity to build equity. Plus, homeowners enjoy the stability of knowing the home is theirs (there’s no landlord to arbitrarily raise rent or non-renew the lease) and they have the freedom to remodel, renovate and decorate as they choose.

If buying a home is right for you, be sure to talk to us about a mortgage that can turn your dream of owning a home into a reality.

 

All loans subject to approval. Rates, terms and conditions are subject to change and may vary based on credit worthiness, qualifications and collateral conditions.