Many young families and individuals often ask should I still be renting or is it time to consider buying a home? The answer, truthfully, depends on several factors and which choice is right for you today?
Written by BALANCE
The housing market tends to shift a little each year, which changes the factors regarding housing choices. There are arguments both for buying and for renting, depending on your individual circumstances. To help you evaluate your own situation, consider these five important questions as you make the buy-or-rent decision.
How long do you plan to stay where you are?
Your intended length of stay has a huge impact on whether it makes more sense to rent or buy. There are many costs associated with the process of buying a home outside of the cost to purchase it–brokers’ and appraisal fees, title insurance, mortgage origination fees, and closing costs. The longer you remain in a house, the more time you have to spread out the costs. Selling the home within a few years may not offset the fees due to there not being enough appreciation.
Are you throwing money away on rent?
The primary argument in favor of purchasing a home is that you build equity in a valuable asset that can boost your long-term net worth. In contrast to this, paying rent each month seems like spending rather than saving. Rent may actually be less costly after factoring in all of the expenses associated with ownership.
Focusing solely on the monthly mortgage payment versus monthly rent may be overlooking additional costs of ownership.
What tax savings can I expect with home ownership?
Do house prices always go up?
Which option will have a greater impact on my overall wealth?
There are benefits and drawbacks to each option. Both are major financial and lifestyle decisions and there isn’t a right answer for everyone. Before signing a mortgage or lease, weigh the benefits and drawbacks of each choice.
BENEFITS OF OWNING A HOME
In the first few years of making your mortgage payment, you’ll pay interest charges, which may be tax deductible. The longer you live in the home, the more principal you will be to pay off. As the balance of your loan declines, the equity in the home climbs. Owning a home also benefits your credit. Lenders perceive you as a good credit risk because your house can serve as security against future loans.
DRAWBACKS OF OWNING A HOME
BENEFITS OF RENTING
DRAWBACKS OF RENTING
Attitudes have shifted in terms of homeownership and the best advice we can give you is to assess your financial circumstances and lifestyle needs to decide if renting or buying is for you.
Try out this rent vs. buy calendar to see what fits your budget best: https://uhmfoundation.balancepro.org/resources/calculators/rent-vs-buy-calculator