Almost everyone will, at some point, have to consider buying vs renting their home. As mortgage professionals, you may expect us to come down heavily on the side of purchasing; after all, we sustain our business when people buy homes.
But we realize that not everyone is in the right situation to purchase. Purchasing a home, in fact, is not always the right choice.
While we certainly believe in the benefits of homeownership, we want to make sure that buying is right for you. Let’s look at the advantages of each option, then look at a few specific situations that hint at (but certainly don’t prove) that the time is right to rent or to buy.
The question of buying vs renting is complicated, but this article may help you make the best choice for you and your family…
Buying vs Renting a Home: How to Make the Best Choice For You
The Advantages of Renting
There are plenty of exceptions, but from a monthly-budget perspective, renting is often cheaper than buying. With homeownership, you not only pay the mortgage, which can be higher in cost than renting, you also have to pay for repairs, maintenance, and upgrades. When you rent, however, all of these costs are covered by the landlord.
All of the surprise expenses for repairs are covered by the owner. As a homeowner, that means you; as a renter, that means the landlord. While the cost may get pushed to the renter, renting also means no taxes and no downpayment. Another advantage, when you rent the insurance is cheaper; renters insurance is usually much less than homeowner’s.
Depending on where you rent a home, you may also have access to amenities such as a pool, spa, workout facility, lounge, and other luxuries that homeownership doesn’t bring.
Renting also brings better flexibility. If you want to move across town next month, it’s relatively easy when you rent. The same can’t be said for owning, which requires the extensive process of purchasing a new home and selling the old.
The Advantages of Buying
Homeownership is a longterm game. Yes, it’s usually more expensive than renting, but most of your mortgage payments will go towards repaying the loan and building your “equity,” which is industry lingo for how much of the home you own. Essentially, homeownership acts as a forced savings account, with a portion of your payments going into your home. Once you have paid off the mortgage, you own a home worth (usually) hundreds of thousands of dollars.
Homeownership also provides more choice for what you can do with the property. If you want to tear out the front bushes, remodel the kitchen, and create a home theater in the basement, you have every right to do so. (Assuming it doesn’t conflict with building codes and HOA guidelines.)
With renting, the cost will gradually be increased, as landlords need to continually raise prices to keep up with inflation. However, a mortgage with a fixed-rate will not change; the amount you pay at the beginning is the same you pay at the end. This is a significant advantage that makes homeownership more predicable.
There are also tax benefits to owning a home, allowing you to deduct costs like property taxes and interest.
Now that we know the advantages of each, there are some specific situations that might indicate that one or another is right for you.
When is it Right for You to Rent
Most renters value the lower cost. If you are someone with a tight monthly budget, a budget that could be ruined if you had to pay for large repairs and maintenance on the home, it may not be a good choice to buy.
If flexibility is also a priority, then renting may be the best choice. Renters often want the ability to move from one location to another in a relatively short span, so owning a home simply isn’t possible. If you are on a career that requires you to move frequently, or if you simply haven’t decided where you want to live, it’s probably best to keep renting.
Finally, there is the savings situation. Purchasing a home often requires a significant amount in savings, and this isn’t just for the downpayment. When you buy, it’s often wise to have at least a few thousand dollars extra to make any repairs, purchase furniture, or upgrade the home as you see fit. These expenses can rise fast, so you’ll want this cash ready if (and when) you need it.
When is it Time to Make a Purchase
Probably the most important sign that you are ready to purchase a home is when you know where you will be living in the future. If you have an established job and expect to be in this location for a long time, you fit the most basic requirement for buying a home.
But you also need some cash for a downpayment. If you have been saving for years and have a strong amount saved, you may be ready to make the purchase. This also means having steady employment. If, for any reason, you may not have your current job in the near future, you may want to wait until you have more stable employment. However, if you have every reason to believe that your employment is here to stay, them by all means you can make the purchase.
If you are tired of renting, if you have children or will have children soon, and if you have a strong financial footing, it may be time to buy.
Can I Buy with Bad Credit?
Many people think that bad credit is a sign they should keep renting. However, there are low-credit financing options that allow you to enjoy the financial benefits of homeownership, even if your credit is not great.
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If the time is right for you to purchase a home, contact our team today. We’ll make sure you get the best service to help you secure a loan that fits your goals.
Whether you want to purchase a small condo or a large house for your entire family, let us help you find a loan that fits your budget!