(Published on - 5/26/2020 5:22:57 PM)
For many years, home ownership has been identified as a sign of success. You own a house= you have money and you are successful. That is not the case. Owning a home is the American dream, of course. It is mine, therefore I made it in life, but that also comes with way more work. Not everyone that buys a home is necessarily financially successful, just like not everyone that rents are financially struggling. There are things to consider when thinking about your next move. Renting or buying are the options, but which one is the smartest? There are many questions to ask yourself when making that decision, and we are going to break it down for you.
Essential questions: Are you out of debt or are still paying debt/loans off?
Do you have enough cash for a 10–20% down payment on a 15-year fixed-rate mortgage?
Will your house payment be 25% or less of your monthly take-home pay or more?
Do you move around a lot or do you plan to stay in the same location for 3+ years?
Buying a home is a lot of consider. First and foremost, finances must be in check. Asking yourself the first two questions above are pivotal. Being in debt and buying a home do not exactly go hand in hand because you will more than likely always be in debt when deciding to add such a big financial responsibility like buying a home. If you are still paying off debt or have any other kinds of loans, renting is your best bet. Another thing to think about is payments towards mortgage. When you buy a home, you are more than likely getting a mortgage (loan) to purchase the property with. It doesn’t stop there because you have to make payments towards this loan. Once calculated and broken down, can you handle it? If it’s too much, go ahead and rent so that you are not responsible for so much. Going into the next question, is the payment on the house more than 25% of your pay? If it is, you will be in trouble because you’re spending more on the house than you have in your pocket, in which case, when you decide to rent, you can balance your finances without over extending yourself. Take into consideration other finances/bills you are responsible for as well. You may make good money, but the payments on the house are significant. Lastly, how long do you plan on staying? If it is less than 3 years or so, then you’re better off renting. Why would you go through the trouble of buying a home and spending a significant amount of money when you have no plan to stay for long? If you are ready to settle down in the city of your choice with that dream job, then go buy that house! One last thing to think about is maintenance; when renting, you are not responsible for fixing anything. As a homeowner, you report to yourself, so anything that goes wrong, comes out of your pocket.
Here are few broken down pros and cons for renting vs. buying:
Buying Pros: Privacy
You own it
Your home may increase in value later and if you decide to sell it down the road, you are in for a treat
Property taxes=tax deductible
Buying Cons: More expenses
If the home needs renovations, you are the only one responsible to fix them
You will be making payments on the home for a long time
Renting Pros: Move freely
You are not responsible for maintenance
Renting Cons: Rates for rent fluctuate, so they can go up
It is not your own
Less freedom to renovate