There is a trend that has been sweeping many major metropolitan areas, and a growing number of small towns too—selling your home because renting is cheaper, or never planning to buy in the first place. But is it really cheaper to rent?
It Depends Where You Live
In a city such as Chicago, the median home value is around $220,000—and that is for a condominium, not a home. This means that on top of your mortgage and homeowners insurance, that you pay an annual condo association fee and a monthly assessment and/or common area maintenance fee. Those fees alone often total over $800 a month, and may not include parking. In other words, in some cities, it is significantly cheaper to rent.
It Depends On Your Goals
Our parent’s generation was more likely to work at the same job and live in the same city and home for several decades. However, Generation X and Millennials are more likely to job hop, relocate for work, or even live abroad as a digital nomad. So again, buying may not be cheaper—unless you plan to rent out or put your home on Airbnb.
It Depends On How Strategic You Are
The lesson we learned from the housing crash of 2008, is that even low-interest mortgage rates really add up—often to the tune of twice the amount you purchased your home for. With student debt, saving for retirement, saving for your kid’s college education, and the increased costs of living—purchasing a home must be a far more strategic decision than in year’s past.
For Many, The Increased Cost Is Worth It
A yard, the design style you prefer, the freedom to decorate, remodel, and choose the appliances you wish—to have a home built to your specs. For many, the increased cost is worth it. At the least, you must do the math so that you understand which is cheaper.
So, is it really cheaper to rent? In many cases it is. To make an informed decision, meet with a financial advisor before you buy.