Buying or renting: what to consider On Real Estate
Among the biggest decisions in life, purchasing a home tops the list as an area of concern for many people looking to make the best possible choice for their family. Some homebuyers wonder if they will have the long term stability needed to maintain a mortgage, while others wonder at the cost of repairs and unforeseen issues that could arise. However, there are many huge advantages to owning a home, and potential homebuyers need to know the risks as well as benefits. For some, renting seems like the best option, if purchasing doesn’t fit their current situation, especially as younger adults struggle to save for down payments and need more time to find their way in the work force. Today we are going to look at the advantages and risks of both options.
OWNING Pros to owning your home
• Build equity and provide funds for future needs.
• You will be paying for housing either way - for some, it makes more sense to add their housing payment to their advantage.
• Owning can be a form of forced savings as your home appreciates in value.
• Studies have shown that homeowners have a net worth more than 45 times greater than that of a renter.
• Substantial tax advantages to owning a home (such as itemized property tax and interest).
• Ability to redecorate, remodel, make improvements, etc.
• On time mortgage payments can increase credit ratings.
• Buyer has fewer restrictions and rules for things like owning pets, having children, noise, etc.
• In many cases, monthly payments owning a home can be less expensive than renting.
• Pride in homeownership and investment into your local community.
Cons to owning your home
• Initial cost to purchase (downpayment, escrow, etc) can be expensive.
• Buyer is responsible for taxes, insurance, maintenance and repairs, or dues from a HOA, if applicable.
• Homeowner’s have less flexibility to move around frequently.
• Market and home prices fluctuate and there is no guarantee of how much money can be made at the time of sale.
RENTING Pros to renting a home
• Funds needed initially to move in are typically low.
• Monies needed for a downpayment could instead be used to invest into savings.
• Limited responsibility for repairs and upkeep.
• Renters have the luxury of mobility and can move around easily with short term leases.
• Insurance costs are lower for renters than homeowners.
Cons to renting a home
• Renters still pay for repairs, but the payments are working into the monthly rental payment.
• Rental housing costs aren’t fixed like they are with a fixed-rate mortgage - rent will most likely go up each year.
• Renting simply pays for housing - there is no additional savings or benefit after rental is done.
Renters miss out on low mortgage rates.
While I believe homeownership is usually the best financial choice, in the end there are two main factors to consider in addition to those listed above:
• How much upfront funding does the homeowner have and what is stable affordability offered to them in regards to their salary? Financial experts suggest that buyers keep their mortgage payments at 33 percent or below their gross monthly income.
• How long does the homeowner expect to stay in a specific location? Most experts agree that in order to make up initial costs, a homeowner needs to stay at least 3 years, or more preferably five years at minimum.