Buying or Renting a Home: Which is best for you?
Should you buy or rent? You probably had asked this question yourself. Would buying a home make more financial sense than renting a home? Buying a home is the biggest financial purchase we will ever make in our lifetime and it is only natural to carefully consider our situation before deciding whether to rent or buy a home.
Renting vs Buying
- Pride of ownership
- Your monthly payments build equity and lead toward homeownership
- Your monthly payments will remain the same for the span of your loan with fixed-rate mortgage
- You can make profit when you sell your home if its value increases
- Tax deduction
- Helps build good credit
- You can pass the home to your family members
- You can make any desired home improvements
- Coming up with the down-payment and other home buying fees
- Risk of having to sell at the wrong time if you need to suddenly move
- Responsible for maintaining the property
- Making long-term commitment to a location
- Unlike buying, leasing is a short term commitment
- You don’t pay for repairs
- Rent payments may be lower than mortgage payments
- You don’t have to pay for closing cost or big amount of down payment to start renting
- There’s no investment risk if the housing market change
- There is no tax break for renting
- Unlike buying with fixed-rate mortgage, your rent will most likely increase from year to year
- No building of equity
- You cannot do any cosmetic or alteration done to the home
- Landlords may not respond readily to your concerns
- Can get kicked out with little notice
Are You Ready To Buy?
Seeing how much can you afford for a home is a good first step in balancing the decision whether to rent or buy a home. You also need to consider your situation. How long do you expect to live in this house? If you are buying a home, be prepared to live there for five years or more in order to recoup the cost of buying and to build your equity. If you are not ready for long term commitment, you’re probably not ready for the responsibility of home ownership.
Do you also have the financial capacity to buy a home? If you are thinking of buying a home, the first step is to consult with a lender to determine if you can qualify for a mortgage. They will need to check your credit history, your income, debt-to-income ratio, and your assets. You have to meet the lender’s requirements in order to get approved for a loan.
Buying a home is an “American dream,” but it is also a big responsibility that shouldn’t be taken lightly. You should carefully decide your best option and take all the time to consider the pros and cons of renting and buying. But looking at the current state when rents go up and mortgage rates are still low making it more affordable for people to buy a home, as long as you are financially ready and emotionally prepared, buying a home can be a smart move.
Get Pre-Approved! Getting pre-approved is the first step in the buying process, it also acts as a dry run of the loan application process. The mortgage lender will use details you provide about your credit, income, assets and debts to arrive at an estimate of how much mortgage you can afford. It is also FREE and Non-Binding!