Why your rent is often more than a mortgage payment
Tenants Frusted by the headlines on the hot housing market that makes it look like it’s their last chance to buy property will not be exactly comforted by reports that the rents are currently exceeding average monthly mortgage payments. But comparing the cost of owning and renting on a monthly basis is not that simple, since home ownership entails a bunch of hidden costs. In fact, there is no doubt advantages of sticking to rental even though house prices are skyrocketing.
Why is the rent higher than the cost of a mortgage?
VScommenters in this Reddit thread say it best: “Your rent is more you will never pay every month. While your mortgage is less you will never pay every month. Why would this be so? Well the owners must cover the cost of expenses that a tenant will not have to pay, at least not directly:
- Property taxes: $ 2,471 each year, on average (and a lot a lot more in some oneraison)
- Monthly HOA Fees: $ 250 per month, on average
- Repairs and maintenance: $ 170 per month, on average
- Home insurance: $ 80 per month, on average
- Utility bills: $ 200 per month, on average
- Private mortgage insurance: $ 160 per month, on average
- Flood insurance required by the lender: $ 61 per month, on average
Other possible costs may include: garbage collection, water and sewer service, pest control, tree pruning, maintenance of amenities, and earthquake insurance. The owners always pay these fees, of course, corn many of them are included in the cost of rent.
Of course, as any jaded tenant knows, you can end up with a money-poor or otherwise cheap owner who skimp on repairs and pest control. Nevertheless, the costs are real and they are above what a homeowner pays in mortgage payments (a more detailed breakdown can be found in this Lifehacker post).
That said, pity is not required – homes are equally assets that tend to increase in value, often above 10% per year, so they are very valuable even given the ongoing costs of owning them.
Why renting is not so bad
Cost certainty and flexibility are underestimated aspects of leasing. When you rent you know exactly how much you are going to spend on housing each month. Unlike a homeowner, you don’t have to worry about a 30-year mortgage commitment and you don’t have to pay for unexpected expenses like a new HVAC system or a new boiler for a few thousand dollars.at least not directly. The other advantage of renting is that unlike homeownership, it is much easier to move when you change jobs, expand your family or find a better and cheaper place to live. That doesn’t make renting any more affordable, of course, but it does have its advantages.
How to tell if your rent is too high
Find and compare rental rates for similar properties in the neighborhood where you want to live, and determine the average monthly rate for an apartment the number of rooms and amenities you are looking for. It is also the number of owners determine their own price, so use your research as leverage to negotiate a lower monthly payment to rent. If you don’t like what’s on offer, you will at least have the option of looking elsewhere.
It’s also worth mentioning here: If you’re late in paying your rent due to the pandemic, consider your rental assistance options, as outlined in this Lifehacker post.