There are definitive reasons for both sides. Find what’s best for you.
First and foremost, this age-old question ultimately depends on your individual needs. Yes, buying a home means you’re putting money into your own investment. Yes, when renting, you don’t have to worry about repairs or maintenance. No one can tell you exactly what’s right for you… it’s up to you to protect your financial future and make decisions to support those financial goals you’ve set for yourself. With that said, let’s run through the standard reasons for each option. Then, factor in your own needs, feelings and thoughts about homeownership.
Decide how long you will live in your home
How long do you see yourself in the home? Is it five years, ten, or maybe more? Typically, if it’s under five, it may not make good financial sense. During those first few years of your mortgage, a large percentage of your payments goes toward interest versus the principal. And, don’t forget the closing costs that you have to bring to the table when signing your documents. If you plan to stay a bit longer though, the purchase might make more sense. You’ll build equity in YOUR home versus your landlord’s.
What do you know about the area where you’d like to live?
You’ve heard it over and over again. Location, location, location. It’s everything. When I was looking for a home with my husband, our Realtor® showed us four properties in one day—all different locations. Of course, the location I was most interested in was the highest-priced home, but we looked at all of them anyway. I was pregnant with our first child and we had two dogs. We wanted a nice neighborhood, quiet, with some land to plant a large garden for our daughter to roam around in. We definitely wanted a good school system and ample town amenities. Two homes had quiet neighborhoods, two did not. The two that did not were very nice homes, but their locations were not ideal (one was next to a loud junkyard, the other off a busy main road). Ultimately, we ended the day seeing the house in the area we liked. You probably could have put a shack on that land and I would have jumped at purchasing it. Home values in the neighborhood continue to rise, as do the number of families, which is exactly what we wanted. We plan to continue to live and grow there, while we improve our home and its value—and yes, our daughter has a garden. The point here is that location is key and the decision should be based on your individual needs and goals.
Research the cost of rent in comparison to mortgage estimates in your area
Some areas have high rental rates, while others can be much more reasonable. Factor in that location, though! Make sure you’re getting your money’s worth and living in an area you’d like to be in. Renting a place in an expensive area versus buying in a different area can vary greatly. Make sure you do your research and find what works best for you.
Consider the pros and cons of renting
- When something goes wrong, you call your landlord to take care of it. They do your repairs and maintain the home and land.
- How much freedom do you need? Would you like to own a pet? Paint a wall lime green? Renting may limit your creative freedom and delay getting a roommate named Fido.
- Are you on the go? Renting makes it easier to pick up and move and travel when you need to.
- Equity. There’s none. Unless you count your landlord’s.
Consider the pros and cons of buying
- How are you with responsibility? When something breaks—heater, plumbing, electrical, appliances—it’s up to you to fix it. Same goes for snow removal, grass cutting and trash removal. All you.
- Creative freedom is a great thing. You can decorate and remodel to your heart’s content. Want an addition? Your local zoning board will sell you a permit to do so. The sky’s the limit with your creativity.
- You can gain equity in your home. This may lead to a higher resale value if and when you decide to sell your home.
Not everyone is a lifetime homebuyer or renter. Your individual needs, timing, finances and thoughts about homeownership factor greatly into this big decision. Think it over and do what’s best for you.