Whether you are leaving your parents’ home for the first time or are moving from your current place, you have much to consider. One of the biggest decisions you can make, in this regard, is whether you should rent or own your new home. Of course, there are advantages and disadvantages that come with both options. It’s worth exploring buying versus renting so you can make the best choice for you.
Should You Buy a House?
Buying a house is certainly a goal probably everyone strives to achieve. However, when you own a home, you will be fully responsible for its maintenance. There are also many costs that go into owning as opposed to renting. You have to consider certain details as well, including the following:
- Whether you are ready to buy: The best situation you should be in if you are considering buying a home is to have no debt. Debts can hinder your chances of successfully being able to afford such a large purchase.
- Emergency funds at your disposal: It is recommended to have at least six months’ worth of money in savings to serve as an emergency fund. You never know when you might need extra cash for a sudden expense and should always be prepared. However, there may be times where you are faced with an unexpected emergency, and don’t have the savings on hand to cover the expenses. In situations like this, you might explore alternative options for short-term financing, such as credit cards or direct lenders for installment loans. These options might help get you through a financial pinch, if you don’t have the savings to cover it.
- Enough money for a 10 to 20 percent down payment: If you buy a house, you need to have at least that much to go toward a mortgage’s down payment.
- Whether your mortgage payment will be 25 percent or less of your monthly income: You need enough money left over for other important things, such as saving for your eventual retirement, your child’s college funds and other goals.
- If you plan to stay put long term: If you commit to buying a house, you should plan on staying in the same location long term. You don’t want to just pick up after one year and move.
These are some of the most vital things to consider if you’re leaning toward buying instead of renting. It’s important to note that even if you’re completely fine financially to buy a house, you have to truly want it as well.
Should You Rent?
Although many people think renting is a waste of money, that isn’t true. While you are paying money to a landlord, you are still living in a comfortable apartment and not spending all the cash you would have to if you owned your own home. There are some things that make renting better than buying, which include the following:
- You have debt: If you’re still paying off debt, it’s better to rent than buy a home.
- You won’t stay in one place long term: If you can foresee having to move within two years instead of stay in one place long term, renting is more appropriate for you.
- You aren’t ready to buy: If you aren’t ready to buy a home, whether it’s for financial or emotional reasons, you should rent.
General Differences Between Buying and Renting
It should be pointed out that buying versus renting isn’t just about ownership. There are other differences between buying and renting that are important to know. They include the following:
- Buying can build equity: If you buy a home, you can build equity over time, which means if your home’s value increases, you will be able to benefit when you eventually sell it. Renting, on the other hand, can eventually cost more money in the long run as landlords increase your rent.
- Tax implications: You can deduct your mortgage’s interest from your taxes. Obviously, with renting, you don’t have to pay a mortgage and won’t be able to claim money from your rent on your taxes.
- Home maintenance costs: If you buy, you have to make repairs and pay for maintenance of your home. For instance, if your roof starts to leak, you will have to hire a contractor to patch the roof or put up a brand new one. When you rent and run into a problem such as your sink having a clog, you simply contact your landlord or superintendent to fix it.
- Renting is more flexible: Renting offers better flexibility, which means if you want to move elsewhere in a short period of time, you are free to do so. With a home, you should be stable and settled to stay long term.
These are some of the biggest considerations of buying versus renting your home. When you have this knowledge, you can make a better, educated decision about which is right for you.