Should you rent? Or take the plunge and buy? Making this decision depends on several factors that you need to take into consideration.
The conventional wisdom that buying a home is one of the best investments that a person can make no longer exists thanks to the Great Recession. Like that wisdom, the notion that paying rent is throwing away money is gone too. Due to many changing factors, buying a home does not always make sense in every situation, even for those who have the means to do so and even when the market is strong.
There are many tools that have been developed to help people determine if their finances can handle home ownership. Many of these tools involve a way to compare monthly rents with mortgage costs for similar homes. The major factors that most calculators use to determine which option is best for you include:
- Mortgage interest and duration
- Amount of down payment
- Inflation rate
- Property tax rates
- Maintenance and renovation costs
- Fees and dues for homeowners association
- Renters monthly payments (including utilities and renters insurance)
This is useful in seeing how many of these variables work together, however, it is important to keep in mind that many of these calculators leave it up to the individual using it to guess where the real estate market is going.
Your Unique Situation
Aside from the costs of buying or renting, many factors of your life should also be taken into consideration. Where are you in life? If you are highly mobile or think you will need to move due to your career, it is probably not the best time to buy a home. You also need to consider your spending habits and be honest about them.
In choosing to rent, the best way to accumulate wealth is to invest the money you would have spent on a down payments, interest payments, house maintenance and other costs of buying/owning a home.
What it Means For Your Lifestyle
A few other factors you should take into consideration:
- Family: You may want to remain close to your family if you have strong ties to each other and are able to help each other when need be.
- Location: If you enjoy the convenience of being able to walk to work, restaurants and stores, you may want to consider how important that is in relation to your financial abilities.
- Schools: if you have kids, the quality of schools is a big factor in which you may be able to rent in those neighborhoods but not buy.
- Age: If you still want to be mobile and won’t be home a lot, it may be best to rent. But if you want to start a family, you may want to consider buying a home.
Each person and circumstance is different. Be sure to consider all aspects of life and determine if renting or buying is best for you!