Buy­ing or rent­ing: what to con­sider On Real Es­tate

Daily Local News (West Chester, PA) - - BUSINESS - Mau­reen Hughes

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.

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