As you’re looking for a new home or apartment, the first question you usually have to answer is whether or not you’re in the market to rent or buy.
While you might be able to easily pose that question, answering it requires much more careful consideration and analysis. After all, it’s a financial decision that will impact your life and budget for years to come.
Before deciding, you’ll need to weigh the pros and cons of renting versus buying a home. Although each option has its advantages, there are several factors that will help you determine which route is right for you given your current financial status.
In this blog post, we will discuss the various benefits of renting versus buying a home to help you make an informed decision about your living situation.
- The Case for Homeownership
- The Case for Renting
- Weighing Your Options
The Case for Homeownership
Many of us grew up dreaming of owning a house in the suburbs with a white picket fence and a big lawn for our kids to play in. Other than fulfilling the American Dream, there are many reasons why you might consider buying a house to be your best option.
One advantage of buying a house is that it provides a stable and predictable living situation. Unlike renting, where your landlord may decide to increase your rent or sell the property, owning a home gives you control over your living situation.
Primarily, you will only need to worry about making your monthly mortgage payment each month. Your monthly payments will stay consistent unless you refinance, your property tax rate changes, or your mortgage includes a financing option where the interest rate may change, like a buydown or an adjustable-rate mortgage.
One of the even more significant advantages of buying a house as a long-term investment is that the property’s value tends to appreciate over time. According to historical data, the average home price in the United States has increased by around 4% per year over the past few decades. This trend means that if you hold onto your property for an extended period, you will likely see a significant return on investment when you sell it.
Moreover, owning a home allows you to build equity over time. As you make mortgage payments, you gradually pay off the principal balance, increasing your equity in the property. This equity can even eventually be tapped into through a home equity loan or line of credit, which can help you fund home improvements, pay for college tuition, or cover unexpected expenses.
Freedom of Homeownership
One of the best things about owning your own house is that it allows you to decorate it as you see fit. Don’t like the color of your walls? Paint them a new color! Do you want to hang up some pictures? Go for it, and don’t worry about making holes in the walls! You have the creative freedom to decorate your house however you desire.
Suppose your property belongs to a homeowner’s association (HOA). In that case, you may have to follow some regulations regarding your home’s exterior. But the interior will still be able to adhere to your creative vision.
Possibly More Affordable Than Renting
Depending on the area you want to buy in, buying a house may be more affordable than renting an apartment. Especially if you are trying to live outside the glitz and glamour of city life, you might find housing prices more affordable.
The major factors at play will be your interest rate and the area you are buying in when comparing whether buying a home is more affordable than renting.
The Case for Renting
You have probably heard the old adage that renting a property is just throwing money down the drain. While you may not be building equity when you pay rent, you do need somewhere to live, and sometimes, it doesn’t make any sense for you to buy a house. Here are some reasons why renting may be your best option.
More Budget Friendly
While you are borrowing money to buy a house and you repay it over time, there are still some upfront costs. Most loan programs require a down payment. A sizeable down payment can help you get a lower interest rate and, in turn, lower your monthly payments. You also can’t forget about closing costs. Closing costs include a variety of different fees that are required to finalize a mortgage.
These upfront costs can deter many people from buying, even though some loan programs and grants can assist with down payments and closing costs.
Easier to Relocate or Move
Maybe you’re still figuring out what your future will bring. That’s okay! You can consider renting a trial period for living in a particular area. Your lease dictates the time you must stay, but even then, some landlords might let you buy out the remaining time.
Renting allows you the flexibility to relocate when your lease is up. Perhaps your financial situation has changed since you began renting, and you can afford to live in a nicer area of town than when you first moved into where you currently reside. Or maybe you have grown out of the city nightlife and are ready to settle down in the suburbs. No matter the reason, renting can provide you the flexibility to relocate when you want it.
No Taxes or Maintenance Costs
One of the best benefits of renting is that you are not responsible for paying property taxes and usually do not pay maintenance costs. While your landlord may factor property tax costs into your rent, you are not directly responsible for paying or filing those taxes.
If something breaks, you are usually not responsible for finding someone to fix it or paying them unless you are directly responsible for causing that damage. Suppose your water heater has reached the end of its lifespan. If you are a homeowner, you could pay around $1,000 to replace it. If you are a renter, all you need to do is call your landlord, and they are responsible for paying to replace it.
Weighing Your Options
Now that you understand some of the advantages of each option, you can evaluate renting versus buying in the context of your plans for the future.
Factoring in your employment objectives
Your employment situation will definitely impact your housing decision. First, most loan programs require borrowers to have a record of steady employment. There are options for people with frequent job changes, but it can make the loan process more difficult. One of the benefits of working with an expert loan officer is that they have experience finding solutions for any potential roadblocks that may arise.
Then, you need to consider whether your employment plan will keep you in the same area for an extended period. Buying a house may not make sense if you work in an industry where you are relocated frequently or if your dream job is elsewhere.
On the other hand, maybe you are at your dream job or own a small business that ties you to the community. Ensure your career goals can be achieved before committing to a specific area.
Considering whether you’re likely to move
Similarly to your employment objectives, you need to consider whether you are ready to lay down your roots in one place for an extended period. Most mortgages are either for 15 or 30-year terms. It might not be the right move for you to go through the mortgage process and pay a down payment and closing costs if you’re likely move in the next few years.
Finally, you should consider if you’re ready for a long-term investment. The general rule is that it takes at least five years to gain enough equity to outweigh closing costs and general homeownership. Make sure that you are financially and emotionally ready for the long haul.
Whether you decide you are ready to buy a house or continue renting for the time being, understanding your financial situation can only benefit you. Getting pre-qualified with a loan officer will help you determine what you can afford at this very moment.
Our friendly team of expert loan officers make the process easy and will help you make an informed decision based on your financial goals. Get started today and take control of your future!
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The included content is intended for informational purposes only and should not be relied upon as professional advice. Additional terms and conditions apply. Not all applicants will qualify. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. This is an advertisement. Prepared 3/23/2023.