Deciding Whether to Buy or Rent a Home

Many people choose to buy their own home during their lifetime

Many people choose to buy their own home during their lifetime, but is it time for you to take this step? Before you do, take the time to consider if buying a home is the best option for you; home ownership may not be advantageous for everyone.

Advantages to Owning a Home

For most people, owning a home at some point in their lives is a good decision. A home is frequently the biggest investment of your life. Renters say goodbye to rent checks each month, never to see the money again. A home owner’s mortgage payment, however, helps to increase his or her equity in the house. The homeowner’s investment in the house may grow over time.Rent may seem affordable today, but will likely increase with inflation. What will your rent payment be in 20 years? In contrast, mortgage payments are generally more stable. Homeowners with fixed rate mortgages will make the same payment for the life of the mortgage, regardless of inflation. In 20 years, this payment might suddenly seem like a much better deal than it did originally. When you own a home, you make the decisions on improvements and decorating. You can customize your home to your taste. Renters are often limited in the changes they can make to their properties. Even worse, the money you spend on any significant improvements stays with the landlord instead of you.

Advantages to Renting a Home

Don’t overlook the advantages in renting a home. Finding a rental property is much simpler than buying a home. There are no inspections, purchase agreements, or mortgage paperwork. If something breaks, it is generally the landlord’s responsibility, not the renter’s, to fix it. If you don’t plan to stay in one place for a long period of time, renting may be the best option. Renting is more flexible than owning a home. With properties that have a month-to-month lease, you can make a change in 30 days. You can pick up and move without having to worry about selling your home. You’ll avoid buying and selling costs that can run up into the tens of thousands of dollars with each home.

Things to Consider When Deciding to Buy or Rent

1 Compare Monthly Costs
To make an informed decision, you need to compare the cost of renting to the true costs of home ownership. As a home owner, you’ll have a monthly principal and interest payment. You’ll also have payments for real estate taxes, school taxes, and insurance. On top of those costs, you’ll need to budget money for regular home maintenance and unexpected repair costs. Lawn care, snow removal, and pest control are just some of the costs that you need to consider.

2 How Long You Plan to Stay
Buying a home costs money. Closing costs can run into thousands of dollars and you will also pay for inspections. Selling a home can cost even more. Realtors can charge several percentage points of the home’s sale price. On a home that sells for $200,000, a 6 percent realtor commission will cost $12,000. If a home appreciates in value, home owners can pay for these costs out of their investment gain. However, home appreciation takes several years. If you plan to move too soon, you’ll lose out on the appreciation. You’ll be stuck paying the selling costs that may wipe out your down payment.If you plan to stay three years or less, renting may be the cheapest option. The ideal time to spend in a home before selling is at least five years.

3 Buy What You Want, Not What the Sales Person Wants
Real estate brokers make their money on commission; they earn a percentage on the purchase price of your house. The bigger the home’s price, the bigger the commission they earn. The less time a real estate broker spends house hunting with you, the more money in their pocket. A real estate broker may nudge you to buy a house that you aren’t sure about simply to get a sale made.

4 Consider the Location and Your Lifestyle
Buying a home is not just buying a house. It comes with a neighborhood and a location. How far is the home from your work? How close are family and friends? Are there recreation activities close by that interest you? If you are not happy with the location, you may come to regret your decision to purchase a home there.