Determining whether purchasing or renting a home is a question that comes up in most people’s lives at some point. Even lifetime renters who love apartment living have had internal struggles on which is better, renting or buying. This begs the question, what’s the right answer? The good news is the answer is which is best for your lifestyle and financial situation. The bad news is it’s simple to imagine looking back and wishing you had not purchased a home, had bought at a different time, or spent so many years as a renter. Thus, to avoid financial frustrations down the road, it’s important to determine if renting vs buying is the right choice for you.
To help with your decision on renting vs buying, it’s important to ask the following questions. Keep reading to learn more!
Can I afford a home?
The first response, when asked this question, is, “yes, of course,” but that’s only for the mortgage payment. Considerable costs beyond a mortgage payment exist when owning a home. When renting, you only pay the rent, without property taxes, HOA fees, landscaper checks for snow plowing, lawn mowing, and fall and spring cleanups. Your only other cost when renting is paying for utilities. Also, if an appliance or fixture breaks, you call maintenance, and they fix it. In a home, you are responsible for all costs and if you can’t afford to pay for it, then it won’t get fixed.
Has the economy and pandemic complicated life’s situations?
If you’re searching for an excuse to put off purchasing a home, the pandemic is a good one. Currently, high demand for housing exists across the U.S., making it more difficult and expensive for first-time buyers to find a home. The record low-interest rates, due to the pandemic, have fueled demand while pandemic-related labor issues and supply chain challenges have slowed new construction. In some markets, high demand and low inventory have pushed prices over 15%, meaning buyers can expect to pay more for the same home year-over-year.
Is now the right time to buy?
This is a critical question and one that only you can determine. It’s important to research whether it’s a buyer's or seller's market. If it’s a buyers’ market, then you will be able to get a better deal on housing in most locations. If it’s a sellers’ market, then you will be bidding for a home, likely over the asking price.
How many years should you continue renting before buying is the best option?
This is a challenging question, however, you could contend that renting is an ideal option when investing money every year. Most buyers don’t calculate that maintenance costs range from 1-3% of a home’s cost each year. Also, you may not realize that the home’s value could significantly increase in value over time or decrease if the rest of your neighborhood falls into economic troubles. Thu, homeownership is a better investment, but a renter who invests what could be used for property taxes and house repairs may do well.
What are the pros and cons of each?
The pros of owning a home include:
- Building equity – you are improving your credit score with every payment and building an asset portfolio.
- Freedom – you have more freedom to amend your living space without having to request permission from a landlord.
- Investment – you don’t make money on rental payments, but likely will on house payments as years pass.
- Space – apartments are almost always smaller than a home.
The typical cons of owning a home include:
- Accumulation – most homeowners begin to accumulate a sizable number of items once moving into a home, which makes future moving more difficult and could cause clutter.
- Maintenance – if there’s an issue in your home, you are responsible for fixing the issue, not a landlord.
- Property taxes – you must pay property taxes on your plot of land. Depending on where you live, this could be more than your mortgage payment.
The pros and cons of apartment living are the reverse of home living.
Regarding which is better, renting vs buying, only you can answer this question after answering the above questions. There are certainly pros and cons to each option, which could help sway you in the right direction to meet your lifestyle and financial situation.
To learn more about the difference between renting and purchasing a home contact Chandler David Smith today! Their professionals are standing by ready to answer your real estate questions!