It is time to answer one of those age-old questions. Or at least a question many face these days: Should I rent, or should I buy? Many say that we are currently in a buyer’s market, but that doesn’t necessarily mean everyone should go out and buy their own home. There is a time and a place to make this decision. In fact, there are many factors to consider when deciding if you are going to purchase a home or rent.
As you decide, you have to take your finances into consideration. Calculate whether you can afford buying or renting by making a budget with your fixed and variable expenses. It’s a tedious but necessary step in the process of buying or renting.
- Buying. When you go to purchase a house, you have to be able to afford several different things. Generally, you need to be able to afford a down payment, which is usually 10 to 20 percent of the cost of the house. But, that isn’t the only financial part that you need to consider. Remember that you will have a mortgage (which is usually higher than a rent payment), utilities and repair costs. However, once some of these expenses (like the mortgage) have been paid, the house is yours!
- Renting. In some cases, renting won’t be quite as expensive in terms of what you are paying for monthly, but without the goal of paying off a mortgage, you will be paying in perpetuity with no reward to look forward to. If you are on more of a fixed budget, renting may make more sense for you. In some cases, when you are renting, your monthly rent will include utility costs.
Often, the answer to the buying-versus-renting question can depend on where you live. Location can determine price, income and value – three important factors to consider.
- Buying. Some places around the country are simply more suited for buying a home rather than renting. Depending on where you live, land may be cheaper, which makes housing more affordable. However, in some places – mostly larger cities – purchasing a home can be quite expensive.
- Renting. If you happen to live in one of those cities where property values are high and purchasing a new home is a little out of your price range, then you should definitely consider renting rather than buying.
Before you answer the question at hand and make your final decision, ask yourself one more: “Will I be staying in this spot for more than five or seven years?”
- Buying, If you answered yes to the question above, then buying your home might be the best option in the long run. You might need to save your money and be a little more budget conscious for a while, but in the end, you will be happier because you are paying for something that will be yours someday. It will also be a much more permanent solution.
- Renting. If you answered no to the question above, then you will probably want to rent rather than buy. If you plan on moving around, renting simply makes the most sense. With no commitment longer than a year or two, you can simply pack your things and move on to the next destination. You’ll avoid the hassle of trying to sell the property after only living there a short time (and building no equity).
Ultimately, the choice of buying or selling is up to you. But you have to go into the process with a realistic outlook. Can you afford your decision? Are you in the right location to buy or rent? Do you plan on moving soon? These are important questions you need to take into consideration as you plan for the future.