Should I Buy or Rent a Home?
One of the most important financial and lifestyle decisions that you’ll make as an adult is deciding whether to buy or rent a home. It’s not an easy decision and really intimidates a good amount of people since the average person tends to change their mind on this topic every 5-7 years. New buyers are often overcome by the joy of a new home, whether they are buying or renting, and don’t think things through clearly. However, if you do your research, really delve deep into your personal situation, and find a good realtor, you can make a thoughtful, educated choice. Sure, it’s an exciting time, but it’s really important to ask yourself some important questions before you make the final decision to buy or rent. It ultimately boils down to a few different factors. Here’s a simple yet concise outline of things to consider:
Questions to Ask Before Buying a House
There are tons of advantages to buying, but it’s probably best to start with these financial considerations first:
- Can I afford the upkeep and maintenance? There is no landlord responsible for the lawn, electricity, water, etc, so make sure you budget these expenses into your plan when deciding whether to buy. It takes time and money to keep your home in good condition.
- Can I keep up with the taxes? You will be responsible for more than the mortgage payment. You will have to pay costs such as property taxes and home owners insurance, so keep this in mind when you think about your budget.
- How secure is my job or cash flow?
- Will my job keep me near my house for at least five years so that I have time to earn equity? Typically, a homeowner should stay in a house for at least 5 years to make up the costs of the home and build equity. Your wealth will increase as you gain more home equity.
- Am I buying in an area that is forecast to retain or even grow the house value?
If you’re doubtful of any of these questions above, then renting may be your best option.
Advantages of Buying a House
- You Own It! – You can make whatever upgrades to the house you’d like as long as you abide by the local POA guidelines (if they exist).
- Build Equity – Provided you stay in the house at least five years, the odds are that you will earn a return on your investment versus renting an apartment where you will almost definitely see your rent go up over the same timeframe.
- Financial Stability – Monthly payment is set and won’t go up.
- Tax Advantages – You will be able to claim the interest and property taxes when you file.
- Credit – Probably one of the biggest benefits is that you will build up your credit.
Advantages of Renting a House
The advantages of renting a house instead of buying are really circumstantial. If you have some doubt about your job security or feel that you might have to move within the next few years, renting may be the way to go.
- Minimized responsibility – If major appliances or major defects exist, all you have to do is make a phone call. The landlord is responsible for the repairs and upkeep on the rented property.
- Low initial investment – Typically, the initial investment is quite lower when renting versus buying and moving in is momentarily cheaper since there most likely be fewer deposits required.
- Insurance costs are lower – The renter only needs to insure the contents of the rental property.
- Budgeting is easier – Rent is a fixed amount every month and often times even includes utilities. Since the cost is set, the renter can often budget easier.
- Easy mobility and flexibility – Provided you leave when your lease has expired, it’s much easier to move if needed.
- Don’t have to worry about risk of buyers or sellers market – You don’t have to worry about home prices fluctuating.