Many renters, especially young couples planning to settle down and start a family, debate whether to keep renting an apartment or buy a home. Depending on your financial situation and long-term goals, though, one option may be better than the other. To determine if it’s the right time for you to start searching for a house, consider the following:
Money
Some renters think they’re throwing away money on rent. It’s true that you might be able to find a monthly mortgage payment that is similar to, or even lower than, your current rent; however, be careful not to overlook the additional costs of homeownership.
As a homebuyer, you’ll need to save up thousands of dollars for a down payment and closing costs. After the purchase, you’ll also need to budget for the mortgage, insurance, property taxes and maintenance, among other expenses. As a renter, you might need to pay for renters insurance, but all taxes, maintenance and repair costs are on the landlord.
That said, if you can afford the extra costs of homeownership, there are financial benefits to buying a house. Chief among them, of course, is a home’s ability to appreciate over time. Homeowners can also take advantage of tax deductions that might help with overall costs.
Time
One major impact on whether it makes sense to rent or buy is how long you plan on staying in the property. Rentals make the most sense for short-term stays. Unless you intend to live in a home you buy for at least a few years, the house likely wouldn’t appreciate, and you’d be selling it either at a loss or with little return on investment.
Conversely, a long-term stay in a home could allow you to not only cover the initial costs of purchasing, but also build up valuable equity. That profit isn’t guaranteed, though. Various factors, including market fluctuations, can affect a home’s worth.
Location
Let’s say you’re in love with a certain town or city, or you want to live close to family. If the homes in that area are too expensive for your budget, renting might be best. If you’re still determined to own, consider looking for a house in a nearby area with lower sale prices. A real estate agent can help you weigh your options.
Freedom
Renting and owning both offer their own distinct freedoms.
As mentioned, renting is great for short-term stays, as it allows you to pack up and move almost whenever you want with little to no financial repercussions. (You could be penalized for breaking your lease early.) You also don’t have to worry about handling maintenance as a renter, but the landlord controls what’s allowed on the property.
As a homeowner, you have much less flexibility to move around, but you can renovate or decorate your house however you like without having to ask a landlord for permission. Unlike with many rentals, you can also have pets. Some buyers find such newfound independence and authority, alone, worth the price of homeownership.
Choosing Mortgage Over Rent and Own a Home?
House prices come with a lot of digits, but that shouldn’t scare you away from buying a home. A mortgage—as opposed to rent—allows you to slowly purchase your home over time. So, instead of paying rent and helping somebody else pay their mortgage, why not invest in your own property?
According to the InCharge Institute of America, there are many benefits to homeownership. Here are some reasons why paying a mortgage and owning your own home is better than paying rent for a temporary living space:
The property you purchase now will most likely be worth more in the future.
With fixed-rate mortgages, you can rely on the predictability of monthly costs.
You have greater privacy and freedom to make your home your own, since there is no landlord overseeing the property.
Of course, owning a home and taking on a mortgage is a big responsibility. The InCharge Institute advises that you take the following into consideration before embarking on homeownership:
You will bear the responsibility for maintenance of your home, including repairs that can range from inexpensive to complex and costly.
Owning a home is a long-term financial commitment.
Take other costs into consideration, such as the down payment, closing costs and moving expenses.
Your mortgage payment may be higher than what you currently pay in rent, so make sure you can afford the increase.
In comparison, renting comes with additional costs, as well, such as security payments and damage fees you may incur.
The Answer
While it is true that purchasing a home can be initially more costly, it can also work to your advantage, functioning as a savings program you can’t quit on. If you will be residing long-term in the same area, then you might as well be turning those monthly payments into property ownership. If this sounds like an investment you’re ready to take on, it might be time to go house hunting
When deciding between renting or buying, consider what you can afford and how you’d like to live. If renting is the best option, you can stay in your current apartment or start looking for a new one. If homeownership sounds best, it might be time to ready your down payment and scope out the market.
In either scenario, never hesitate to contact us for help!
