At some time in their lives, most people are going to be faced with the decision of whether they should buy a home or continue renting. Buying a home will probably be the most expensive purchase you ever make, so this decision is extremely important. The answer is not the same for everyone, nor is it quick and simple. You need to consider a combination of personal, practical, and financial factors when making this decision.
Marriage and family
If you are married and have children who are school age, the stability and pride of ownership may influence a decision to buy a home. Alternatively, if you are young, single, and/or mobility is important to you, renting may be the best option.
If your job is one that will keep you in the same location for several years or indefinitely, buying may be advantageous. However, if you work with a multi-national corporation with many locations and opportunities for advancement, it may be best to rent until you are sure there will not be any unexpected moves in your future.
If you are considering going back to school and your degree may mean a change in your job or where you live, you may wish to wait to purchase a home. Another consideration is the age and educational level of your children. If your children are in an excellent school district and you plan on remaining in the same community indefinitely, it may be a good idea to buy a home and settle in.
You may want to purchase a home if you are young so that you can have a home that is free and clear after thirty years. Additionally, if you are older and retired, you need to take into consideration the fact that you may be on a fixed income. Rents can go up, but your house payment will stay the same!
Is buying a home a practical alternative for you? Does it make sense? It used to be that everyone purchased a home. Home ownership was a sign of success and part of being a “responsible adult.” This is no longer the case. Many people choose to rent their entire lives. The following are some of the reasons for doing so:
Some apartment complexes have amenities such as a pool, playground, and even a gym. Additionally, many even have get-togethers and activities for tenants that provide social opportunities.
You have the ability to choose an apartment complex that is gated and provides 24-hour security. For single individuals and the elderly, this is an attractive alternative.
With an apartment, there is no need to worry about maintenance. Additionally, you can find an apartment or condo close to where you want to live – your job, or a center of social activity. Additionally, if you live in a big city, owning a home may not be feasible, as homes are extremely expensive.
If you want to move, you can do so relatively easily. Even if you have a lease, most of the time you can break it if you a willing to pay a month’s rent.
What type of lifestyle do you really want? If you dream of seeding the lawn and spending your Saturday mornings working in the yard, a home may be perfect for you. However, if all the responsibilities and actual home ownership seem like an unnecessary burden, don’t feel guilty if you prefer a rented house, condo, or apartment.
How do the monthly costs of renting compare to buying?
To answer this question, you need to list all the monthly costs of renting and those costs related to owning. If you own a home, you will have property taxes, insurance, and maintenance expenses. Additionally, your utility costs may be higher and include costs you have not assumed previously such as garbage collection. Use this calculator to estimate the difference between renting and buying.
Can you afford to buy a home?
You will need money for a down payment and closing costs. Even if you get an FHA mortgage, you will need 3 percent of the purchase price to put down on a home. Remember that with a low down payment, you will need to assume the financial responsibility of mortgage insurance. Find out how much your monthly payment might be if you purchase a home.
When you purchase a new home, you may need more furniture or new appliances. Additionally, you will quite likely have utility deposits. Any repairs or updates to your new home are your financial responsibility.
Would you be better off financially if you used the money for something else?
Once you spend your savings on a down payment for a home, you no longer have that money to use elsewhere. You might be better off investing the money and delaying your purchase of a home. Additionally, consider upcoming needs such as college tuition or health care for you or an elderly loved one.
What are the financial benefits of each option?
If you buy:
You will have tax deductions for the interest you pay on the mortgage.
You will build equity in your property.
You may make a profit if you decide to sell your home in the future.
If you rent:
You will not need to spend time and money on maintenance and repairs.
Your rent may be less than your mortgage payment.
Utilities may be less than if you own a home.
So, what do you do if, after considering all the options and the factors involved, you really do not know whether you should buy or continue renting? If you have lived in rented apartments and condos, try renting a home in an area where you would consider buying. You can experience the daily upkeep and financial responsibilities without the commitment of actually purchasing the property. A year in a rental home will give you a good idea of whether home ownership is for you and your family or you would rather continue renting.
In short, the decision is whether your plans and lifestyle fit with either renting or owning a home and whether buying a house really makes financial sense for you. If and when you are ready to purchase a home, a Realtor can help you answer many of the questions and concerns you have about home ownership.