Should I rent or buy my home? That is the question you’re probably asking if you’re shopping for your very first home or looking for a new place to live in Springfield, MO.
There is no one-size-fits-all answer to this question, as there are many individual factors that will affect your decision of renting vs buying:
- How much do you want to spend on housing?
- How big a dwelling do you need?
- What other financial and personal priorities are important to you?
Here are four other important factors that you will need to consider when deciding if it’s better to rent or buy your home.
#1: What Are the Upfront Costs of Renting vs Buying?
Whether you rent or buy, both options come with some upfront costs.
Upfront Costs of Buying a Home
- Down payment. This is a portion of your home’s purchase price that you pay up front. You will pay the remaining cost with a home loan. Most down payments range from 5% to 20% of the purchase price. So if you’re buying a $200,000 house, expect your down payment to cost between $10,000 and $40,000.
- Closing costs. These are fees that you pay to various third parties for services related to your home purchase. Both the buyer and seller pay some closing costs. As a homebuyer, you can expect to pay between 3% and 4% of the purchase price. Again, if your home costs $200,000, your closing costs will likely range from $6,000 to $8,000.
There are many services included in your closing costs:
- Loan origination fee. This is the lender’s charge for processing paperwork related to your purchase.
- Credit report fee. This pays for running your credit report.
- Underwriter’s fee. This is to assess your creditworthiness.
- Appraiser’s fee. This makes sure your home’s value matches the size of your loan.
- Home inspection fee. This checks for structural and environmental hazards in the home.
- Title search fee. This is to check for any liens on the property that could interfere with your purchase.
- Survey fee. Usually incurred for single family homes and townhomes.
- Taxes. Assessed on money you’ve borrowed for your home loan.
So, depending on the size of your down payment and the amount of your closing costs, for a $200,000 home you could expect to pay between $16,000 and $48,000 up front.
Upfront Costs of Renting
When you sign your lease, you can expect to pay approximately twice your monthly rent in upfront costs.
For example, if the monthly rent on your apartment is $1,000, your upfront costs would be approximately $2,000. Also, remember that exact costs may vary, so you could pay more or less than that depending on your location and individual circumstances.
Here are some common upfront costs associated with signing a lease:
- Advance rent. Some landlords ask for 1-2 months worth of rent up front.
- Security deposit. This is usually equal to 1-2 months of rent and may be refunded at the end of your lease, if you leave no damage to your dwelling.
- Broker’s fee. If your lease was facilitated by a broker, expect to pay 10% of your annual rent or one month’s worth of rent.
- Moving fees. Will you be using a professional moving service?
- Off-site storage fees. Do you have belongings that won’t fit in your apartment or rental house? If you plan to keep them, they may require storage costs.
- Pet fee. If your landlord allows pets, you will pay a pet fee up front.
#2: What Are Your Monthly Housing Expenses?
What would be cheaper: mortgage or rent? That can depend on the state of the real estate market and overall cost of living in your city.
Recurring Housing Costs for Homeowners
A monthly mortgage payment covers the following items:
- Principal. This is the amount of your home’s purchase price you still owe.
- Interest. This is amount you owe on your home loan.
- Taxes. This will be part of your monthly escrow payment.
- Insurance. This is also part of your monthly escrow payment.
Recurring Costs for Renters
A monthly rental payment is typically lower than a monthly mortgage payment on a comparable dwelling. This may leave you with more savings left over after monthly expenses, so renting your home may be an advantage if building up your savings is a priority.
#3: How Much Will You Pay for Utilities?
The cost of owning a house goes well beyond your mortgage payment. Homebuyers are responsible for 100% of the following expenses:
- Garbage and recycling
As a renter, your landlord may provide one or more of these services at no additional charge. For example, residents at Farmer’s Park Apartments in Springfield, MO enjoy DirecTV, high-speed fiber Internet, and single stream recycling services.
Because it usually takes less energy to heat and cool an apartment, townhome, or condominium, monthly utility bills tend to be lower for renters than for those living in a single family house.
#4: Who Pays for Maintenance?
As a homeowner, you’re responsible for all maintenance and repairs. In some instances you may be able to handle some jobs in a DIY fashion, such as fixing the sink or painting a room. In other cases, you will need to pay a professional service provider, such as an electrician, plumber, or landscaper, to make sure the work is done correctly.
Here are some of the common maintenance and repair issues that homeowners are responsible for:
- Plumbing issues, including toilets and sinks
- Changing furnace filters
- Cleaning gutters
- Changing smoke detector batteries
- Locating and flipping breaker switches
- Painting, remodeling, and landscaping
As a renter, your landlord is responsible for most maintenance and repairs. All you have to do is put in a work order and someone will come by to fix the problem.
Do you have questions about renting a home? Contact us at Farmer’s Park Apartments. We can provide you with information about our one- and two-bedroom units available for rent, along with services and amenities available to our residents.
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