Should You Rent or Buy?
To rent or to buy? That’s the big question for many families today. With the housing market in a dip, many people are hearing that it’s a good idea to jump in and purchase a house, but it’s a big decision and one that should not be taken lightly. Before buying or renting, take some time to look at the facts. It’s important to take a good look at both sides of the equation when deciding whether to rent or buy a home.
Apartment Renting Pros:
- Flexibility: Move when you want with fairly short notice [1]
- More funds available for investing [1]
- No maintenance responsibility [1]
Apartment Renting Cons:
- No equity accumulation [1]
Home Ownership Pros:
- Increase Equity: Homes count toward your personal wealth [2]
- Provides security for family [2]
Home Ownership Cons:
- Maintenance: You’re responsible for the upkeep of your home [2]
- The average homeowner should budget about
$3,300 annually for home maintenance [3]
- Less access to money [2]
- Possible decrease in value, no guarantees [2]
- Monthly payment for decades: Rates can fluctuate due to taxes (1%-3% of the home’s market value) [4]
- Interest Rates Change [4]
- Home insurance costs: Things like floods and earthquakes are not usually covered and will cost homeowners extra. [5]
Making the Big Decision:
There’s plenty to consider when trying to decide whether to rent or buy. Here are a few tips on what to look at:
Future Plans: If you’ll be moving soon, it’s worth it to rent. Experts advise buying only if you will be in the same location for 5-7 years minimum. [6]
Finances: Savings are important. Do you have enough for a down payment? [6] In order to qualify for most home loans, your total house-related debts (insurance, property tax, loan payment) should not total more than 28% of your income. [7]
Debt: Credit card debt should be paid before you add a mortgage to the mix. [6]
Location: The average rent prices in the area you want to live in will have an impact. Take a look below.
Responsibility: Being a homeowner carries a lot of responsibility. Not everyone is ready. [6]
[8]
Why You Should Rent… Even if You Plan to Buy
Time to get used to a new city/state.
- Find out where you want to live.
- Look for the best schools.
- Find best-priced neighborhoods.
- Establish stability as a family.
- Save up more for the down payment, eliminating extra fees.
While buying a home has always been touted as the big milestone in a young person’s life, that doesn’t mean it’s the best decision. Renting could very well be your best choice at this point. Crunch the numbers and look at all the consequences of either decision before buying or renting.
Sources:
[1]
http://www.smartmoney.com/spend/real-estate/to-rent-or-to-buy-9687/
[2] http://www.homeloanlearningcenter.com/yourfinances/owningversesrenting.htm
[3]
http://www.houselogic.com/home-advice/maintenance-repair/value-home-maintenance/
[4] http://www.bluewatermtg.com/faq.html
[5]
http://www.usa.gov/topics/family-homes/insurance.shtml
[6]
http://www.oprah.com/money/should-you-rent-or-buy-a-house-suze-orman
[7]
http://www.salary.com/articles/articledetail.asp?part=par236
[8]
http://www.ForRent.com
[9]
http://www.salary.com/articles/articledetail.asp?part=par241
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