Buying or Renting: What to Consider Before Making This Decision
For generations, home ownership has been part of the American dream and there is sound financial reasoning for this. Decades of statistics continue to show that becoming a homeowner is one of the biggest financial investments that most people will make throughout their entire lives. But, as the still-painful memories of the nation's housing crisis clearly demonstrate, there are also many good reasons to rent instead of buy. The following considerations will help those who are wondering whether buying or renting is the right choice for them.
Which Option is Really More Affordable, Based on the Current Situation?
One of the first considerations in deciding whether to buy or rent should always be based on the numbers. While it is true that paying rent is doing little to build individual net worth for the renter, this alone is definitely not a good reason to make a hasty decision to purchase a home.
Unlike being a tenant, home owners are solely responsible for making repairs and renovations on the home they own. Whether the HVAC system stops working on a freezing cold night, or a toilet overflows and ruins the carpeting, these costs must be covered by the homeowner, who is already also paying other costs, such as:
- The mortgage payment
- Utilities, including power, water, sewer, and gas service
- Property taxes
- HOA fees (if applicable)
- Maintenance and upkeep costs
As long as the prospective buyer can easily cover these costs on their current income, then purchasing a home can be the most affordable option. If, however, any of these costs are likely to place a strain on the budget, then renting becomes a much more affordable option. Calculating these costs based on current income and expenses should be done before making a final decision on whether to rent a home or buy one.
What Future Plans Could Impact the Decision?
Another consideration when trying to determine whether to buy or rent is what the foreseeable future is likely to hold. Those who buy a home and then have to relocate to another area within a few years may find themselves in a negative equity situation when trying to sell. This happens frequently when homeowners have purchased the home with little or nothing down and are forced to sell before they have had time to build up any significant amount of equity through making the monthly mortgage payments.
In most cases, it can be financially beneficial to choose to rent whenever any major life event is expected within the next two years, such as a career change or retirement.
When are Prospective Buyers Financially Prepared for Home Ownership?
The best home ownership experience occurs when the buyers have made good financial preparations. This includes:
- Having sufficient, dependable income to cover cost of owning a Piperton home, as well as other expenses
- Having saved enough to put at least ten to twenty percent down on the purchase
- Having qualified for a good home mortgage, with an affordable interest rate and repayment terms
- Having chosen a home with affordable recurring costs, such taxes, insurance, HOA fees, etc.
In addition, prospective buyers will want to be sure they are purchasing a home that will offer good resale value in the future.
Before making any decision to rent or buy a home, it can be an excellent idea to find out more about the local housing market in the area in which you will be renting or buying. Sitting down with an experienced, local real estate professional is the best way to get current information that will be helpful in deciding which option is the right one. This information will include local rental information, such as average rental costs and unit availability, as well as local real estate sales market information and expected trends.