Would It Be Better to Rent or Buy?
Estimated reading time: 3 minutes
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When deciding between renting or buying a home, what factors come to mind? Besides the obvious financial considerations like budget, down payment, and credit score, there are several other factors to consider to help you make the better choice for your current situation. This article highlights some of the more common items to think about when making the big decision on whether to rent or buy.
FINANCIAL CONSIDERATIONS
Comparing the monthly payments of rent vs. a mortgage is just one part of the financial picture to think about. Buying includes a mortgage loan and the upfront costs of obtaining that loan in addition to closing costs. Then, there are maintenance, repairs, property taxes, insurance, and other fees to give a total monthly cost. It may be helpful to use a calculator or two to determine what you can afford and what your monthly payments might be with the purchase of a home.
You can also use this Rent vs. Buy Calculator to help you figure out, based on your location and other factors, whether it’s best to rent for a while or take the plunge into homeownership. Keep in mind, though, that this calculator doesn’t take into consideration the intangible benefits of ownership or any potential equity that may come about as a result of ownership. After you’ve compared costs, consider the investment aspect – what future equity in a purchased property may accumulate to make it a financial win.
LIFESTYLE AND PERSONAL PREFERENCES
Do you travel frequently? Have any pets that need more space? Are you planning on changing your family size? Do you need more autonomy and control over your living space? Your current situation and future plans will significantly influence your decision, possibly more than financial factors, whether to rent or purchase a home. Buying may lock you into staying in one area for several years, while renting provides the flexibility to move when needed or desired. On the other hand, the stability that a household provides may be just what you’re looking for. No matter what your personal preference is, be sure to include these preferences in your rent vs. buy decision.
MARKET CONDITIONS
These mostly influence the buying decision. If interest rates are lower, the property’s price is reasonable, and the area’s values are increasing, it may be a perfect time to buy. Macro-economic factors such as housing starts and consumer trust will also play a large role in determining the current and future demand for rentals vs. new housing. This, in turn, will drive rent amounts and house prices up or down according to demand and supply. Keep in the mind that the right time to buy is always when you need to, not necessarily when all market conditions are aligned, but consider the following additional items when making a decision to purchase a home.
By carefully evaluating these factors, you can make a more informed decision if renting or buying is better for your financial situation and future plans. I can provide you with the current housing market trends and any advice to assist you with your decision.