To rent or to buy: that is the question. The answer, unfortunately, isn’t so short or simple. When you’re trying to decide when to make the leap from renting to buying, there are many different factors to take into consideration. Are you ready for the responsibility? Can you afford mortgage payments? Can you commit to this house for the long-term? It’s a lot to think about and a decision that shouldn’t be made lightly. So pull up a chair, get out that calculator, and let’s get started. Should I rent or buy a home? We can’t answer the question for you, but we can guide you toward the right path for you and your family.
Should I Rent or Buy a Home?
When you’re asking the question “should I rent or buy a home?”, the answer can’t be boiled down to one simple choice or equation. You need to consider a variety of different factors, from your location to the housing market to how much money you have saved up. Let’s look at just some of the things you should keep in mind . . .
Rent payments and housing prices change drastically depending on where you’re looking and what sort of place you want. Research your area to determine what you can expect as far as down payments, purchase costs, utility, and maintenance fees go. If you can’t afford what you want in your area, try looking in different neighborhoods or cities.
FUTURE MOVING PLANS
If you aren’t planning to stay in this house for more than 3 or 5 years, you should probably rent. In so short a time, you would had trouble getting the return on your investment. If you are committed to the area, buying is a better idea.
Paying rent is not an investment; you will never see that money again. Buying, on the hand, could benefit you if you sell the house when the market’s good. However, this is not a fool-proof investment opportunity. You never know when the economy might take another dip.
When you buy a home, you can’t expect the landlord to come in and take care of repairs and maintenance costs. You will be responsible and those fees add up. Don’t shrug it off and assume that you’ll have the money if an emergency strikes. If the worst should happen, you might need to spend thousands of dollars on repairs. If you can’t afford it, don’t buy yet.
If you want to buy, you need to be able to comfortably afford a down payment. Although you could manage with less, it’s best if you can afford at least 20% down so that you’ll have lower interest rates. The upfront costs for renting, on the other hand, are much lower, typically including just a security deposit (which will be returned to you if no damage is done) and a down payment of 1-2 months’ rent.
With so much to consider, it can be hard to figure out just what is right for you and your family. If you need some help with the numbers, check out this handy interactive graph. Just input your monthly rent, the price of a potential home, what percent of that you could afford for a down payment, your expected mortgage rate, and annual property taxes. You can also adjust the annual home price change as well as the annual rent change to figure out at what point buying would be better than renting.
So should I rent or buy a home? The answer’s in the numbers, my friend: how long do you plan to stay and can you afford it? Good luck!