Should You Rent or Buy Your Home?
For many people, buying their own home is their way of achieving the American dream. But that doesn’t mean it’s the right move for everyone. While owning a home comes with many benefits, it has some significant problems as well. Often, it makes more sense to keep renting. To decide whether you should rent or buy your home, there are a few important factors to consider.
Should You Rent or Buy a House: Factors to Consider
Likelihood to Stay in One Place
Buying a home is a big commitment. You need to spend time finding the right property, apply for a mortgage, pay the down payment and closing costs, and then move in. If you’re going to invest all this time and money, you want to make sure it’s worth it. Ideally, you should stay in your new house for at least five years to justify all this work.
If you might have to move soon because of your job, you aren’t sure you like your area, or for any other reason, you should probably rent until your situation becomes more certain. If you’re staying put, then buying makes more sense.
Family Size
How set is your family size? Are you 100% sure how many kids you’re going to have or is this still something you’re trying to figure out? If you buy a house, you want to make sure it’s the right size. When you buy before figuring out your family situation, you might buy one that’s too small or big, forcing you to move again down the road. If you’re still unsure, hold off and rent.
Home Equity
One of the big financial advantages of a buying a home is that when you make your monthly payments, you build home equity. This is the wealth you build for yourself by paying off your mortgage and actually owning your home outright. Basically, you’re saving money for the future just by making your monthly payments. When you pay rent, that money just goes to your landlord. If you’ve decided to stay in one place, this is a big financial advantage of buying. Renters should keep this in mind and make sure to invest more to make up for not building any home equity.
Credit Score/ Down Payment
Before you can buy a house, you need a decent credit score to qualify for a mortgage. If you’re having credit problems, your loan will be more expensive or you might not qualify at all. In addition, most buyers need to make a sizable down payment on the house, usually about 20 percent of the sale price. If your credit score isn’t ideal and/or you don’t have enough money for a decent down payment, it might make more sense to rent for another year or two. This will give you more time to prepare so that when you do buy, you won’t have to sacrifice by paying too much or settling for a worse home.
Repairs
When you buy a house it’s yours, for better or worse. If something breaks, it’s up to you to handle the repairs or hire someone to take care of the problem for you. This is one more chore and one more expense to budget for. When you rent, your landlord takes care of repairs so that makes life a little simpler. This is a relatively small concern but still something to keep in mind if you want to rent or buy a house..
Everyone’s situation is different so there’s never a perfect situation when you should always rent or buy your home. By going through this thought process though, you’ll be able to help yourself figure out if you should rent or buy a house and know what makes sense for you right now.
