Deciding to rent or own a home can be quite the conundrum for anyone.
Maybe you are a young and single professional with your first salaried job, or maybe you have a family of four moving to a new state. Perhaps you need a place for just you and your partner, but you might be expecting a need for extra space in a year or two. Or, maybe you just want a change of scenery.
No matter the reason for a move, knowing your options and reasons for renting or buying your next home can make a world of difference in both the short and long term.
The options are fairly straightforward: you can rent an apartment or house, usually with a security deposit and monthly rent payments; or you can buy a condo or house, usually with a down payment, loan and monthly mortgage payments.
There are a number of helpful questions to consider when deciding to rent or buy:
- What is the price of the home?
- How long do you plan to stay?
- What would your monthly payments be?
- What does your income look like going forward?
- Along with the mortgage, can you afford maintenance or other incidental costs often attributed to owning a home?
There is no unanimous "better" choice between renting and owning.
Each person’s situation is unique and there is no one-size-fits-all when it comes to renting versus buying. If you are only going to be in an area for a couple of years, the market appreciation rate may not be enough to make it worth your time to buy.
There are lots of costs associated with home ownership and you should see if the expenses justify the decision.
Renting is an obvious first-step for recent graduates, and it can also be a smart decision for almost anyone in the right situation.
With renting, the comfort of having a 12-month lease as opposed to a 30-year mortgage can be attractive. But one of the biggest benefits of renting is the lack of financial responsibility.
With renting, you are not responsible for repairs or maintenance -- good luck getting your porch power-washed or the plumbing fixed for free if you own your home.
Renting in some areas also comes with amenities such as laundry facilities, fitness and family areas, and maybe even an in-ground pool that someone else cleans.
Buying a home comes with much greater responsibility than renting, and with more up-front costs.
As the homeowner, you are your own landlord. So, if you're a first-time homebuyer, be sure you can afford what you'll need to keep your home in good shape; lawn mowers, ladders, tool sets -- these don’t come with the deed.
Another up-front cost to be ready for is the down payment. If you want a favorable interest rate, you need a smaller loan amount, and the best way to have a smaller loan amount is with a larger down payment. A high interest rate over 30 years can be crippling, so definitely take into account the ability to make a good down payment.
Home ownership also provides the ultimate freedom -- the home is yours.
No matter what direction you go, the most important thing to do is what works for your situation. Being aware of your needs and expectations will help your next step be a confident one.