Owning a beautiful house with a white picket fence is an essential part of many people’s dream lives. Will the picture perfect of middle-class suburban life break down to pieces if you rent a house instead of buying one? Not exactly. In many cases, renting a house actually makes more sense than owning the same property.
People rent many things throughout their lives: from formal gowns and tuxedos to cars on vacation. However, typically, leasing is about short-term use. When we speak of a home, that’s more of a constant notion. Owning a house and a car has for a long time been a symbol of financial well-being. However, times change and more and more people find themselves pondering if it is worth it. Here are some best reasons why someone would want to rent a house instead of buying one.
Benefits and Drawbacks of Owning a House
When a house belongs to you, you have full control over the property. You can alter it to your taste, make renovations as often as you wish, adopt pets and host parties without worries about damaging some furniture. After all, you can sell or rent this house out when you decide to move and get an additional income source.
At the same time, owning residential property is a serious commitment. It incurs a lot of additional expenses besides a hefty purchase price. Maintenance costs, taxes, repair expenses, and more can make owning a house a daunting experience.
When Would You Want to Rent a House
Renting a house is a viable option for many families and individuals. Moreover, in many cases, that makes more financial and common sense.
The Down Payment Presents a Solid Obstacle
A down payment is a sum of money you initially pay to secure a mortgage. If a person has enough funds to pay the whole purchase amount upfront, this is not an issue. However, the average house buyer uses some kind of credit to be able to afford the property.
Mortgage lending is the most popular credit option when buying a house. Typically, lenders require a down payment for most mortgages unless these loans are backed by specific federal government schemes.
The size of a down payment may vary between 3% and 20% of the total purchase price. The average down payment is about 15% of the house price, with an 8% payment typically required from first-time home buyers, and over 18% paid upfront by repeat buyers.
Although the median down payment on a single-family home in the United States is $31,500 (as of Q2 2023), depending on the region where the property is located, it can go as high as $360,000.
The hefty sum can be a major obstacle to financing your own home. At the national level, housing affordability in the US fell to historic lows in August 2023.
However, renting a house doesn’t require a lump sum. Paying for one or two months of rent will be enough to start living in the house of your dreams. Therefore, if you can’t afford a down payment and don’t meet the requirements of zero down payment government programs, house leasing might be your best choice.
Renting is Cheaper Than Owning a House
This year, mortgage rates stand at their highest in the last few decades. Therefore, the price gap between renting and buying a residential property in the US is enormous.
As of Q2 2023, the median rent in America was approximately $1,850 per month, which is about 30% cheaper than the median cost of a monthly mortgage payment, standing at $2,700.
Besides the monthly mortgage payments, owning a house requires constant repairs and other maintenance measures. If you use the property on the lease terms, most if not all of these costs don’t bother you, as the homeowner is the one dealing with these issues. Tenants also don’t have to pay property taxes. In addition, renter’s insurance, which covers your personal property within the rented home, tends to be much cheaper than homeowner’s insurance.
House Leasing Brings Fewer Responsibilities
Many people are too busy to deal with daily house issues. Whether your furnace, air conditioner, sink, or rooftop gets broken, if you rent a house, the landlord is the one coordinating the repairs. That saves a lot of time and alleviates stress, which might be a solid argument for busy people to lease instead of buying.
Even navigating the process of buying a home can be daunting, especially if you’re unfamiliar with the complexities involved. Very often, the help of a professional such as a real estate mortgage broker is required to figure out the best purchase options.
Renting Enables Flexibility
Today, many jobs are not tied to a single office. Digital nomads and other types of professionals work remotely and can enjoy frequent changes of scenery. However, owning a house is a steady commitment which hinders free relocation.
If your lifestyle involves frequent travel, perhaps, owning a house doesn’t make any sense. At least, until you decide to settle down. Financial and legal burdens connected to buying and selling a home are incomparable to the ease of signing a lease agreement.
Besides, flexibility is not only about the change of places to live. It’s also about the changing circumstances. A single person and a family with five kids obviously require completely different accommodations. Hence, if your life circumstances are about to change, you might consider leasing a suitable-for-now house as a temporary option.
Leasing a House Is More Predictable
The property market is very unpredictable. It is sensitive to macroeconomic changes, inflation, changes in rates, local supply and demand, and even the occurrence of natural disasters. In many countries, mortgage rates are also directly tied to foreign exchange which affects national currency value. Therefore, many people who start a mortgage risk ending up paying much more than the house would cost in the end.
Generally, property is considered a good investment. However, black swan events may totally erase the value of any house in a particular area or country. Think about earthquakes, floods, military conflicts, or any economic uncertainty in the region.
Additionally, owning a house presupposes a lot of unexpected and unpredictable expenses. Replacing broken appliances or a damaged roof is costly. It often requires additional loans. On top of the existing mortgage, that may become an unbearable financial burden.
On the contrary, when you lease a house, your financial responsibilities are more or less predictable. Generally, lease contracts prohibit the landlord from increasing the rent during the term of a lease. It makes it easier for a tenant to stick to a set budget, keep up with their saving schedules, and avoid piling up debt.
Summary: Why Renting a House Might Be a Better Option
Although the majority of houses in the US (about 65%) are owned, over 44 million households rent their homes. The reasons for not buying their own place to live might be different. For one thing, renting a house is cheaper and more predictable. Saving a sum of money needed to start leasing property is much lower than the hefty down payment on a purchase. Moreover, home ownership doesn’t give you as much flexibility and peace of mind as leasing does.
