Should I rent or buy? Buying a home is one of the most important decisions you can make. It really gets to the heart of where you are as a single person or as a family. The financial consequences can be enormous, so at Loan Leaders of America, we want you to make the right choice. Say you love your job, but you are also looking for the next best opportunity. You are married and want to start a family, but not sure if you want to put down financial roots in a house. Housing prices per foot vary widely from state to state, but at Loan Leaders of America, we have some ideas to help steer you to the right decision regardless of your location.
Staying Tight or Itching to Leave
If you love where you live, and feel good about your job(s), then you may tilt toward home ownership. But only if you plan to stay put for 3-5 years, as you are unlikely to see enough appreciation in the price of your home to recover up-front costs, like mortgage fees and agent commissions. That’s also assuming home prices are increasing in value, and history tells us that is not always the case.
But I’m a Millennial: What About Me?
A greater number of millennials are putting down roots and getting a mortgage. Those 25-34 years old say they are looking to buy in the next three months. That can be a good strategy, to have your income go to an asset, rather than to a landlord. But it is a big financial decision, so think about a few things.
It is best to rent when:
You don’t have money for a down payment
You don’t have money for the extra costs of upkeep of a home
You’re not sure about your job situation
You have a short term work assignment and may be transferred elsewhere
It is best to own when:
You can cover the added costs of owning a home
You can comfortably make the down payment (typically 20% of the home’s cost)
You can easily cover the closing costs and real estate commission fees
You can cover the maintenance and homeowner’s dues
You are settled in your job and plan to stay in the area
Benefits of Home Ownership
So say you see yourself in the “best to own” category. There are benefits to home ownership. Low interest rates on a 30-year fixed loan can be attractive. It decreases your monthly mortgage, and if you itemize your federal return and don’t qualify for the alternative minimum tax, you can deduct your mortgage interest and property taxes. The biggest benefit is that you are building equity in an asset: your home, rather than paying a landlord every month and that money goes down the financial drain.
At Loan Leaders of America we have a great tool to help you figure out if you are in a position to own versus rent. We call it a Rent vs. Buy Calculator and it can really give you clarity on which way you should go. Using our Calculator tool, figure out how much more you would need each month (above your current rent) for mortgage, insurance, taxes and maintenance. Try setting that amount aside for a few months. Do you miss it? Is it impacting the quality of your life? If the answer to these questions is “no,” then you may be ready to take the plunge into home ownership.
There is also an emotional component to home ownership. Some people just don’t like the added concerns of being responsible for all of the maintenance. But others like the flexibility of owning a property they can change to their liking and tastes, and enjoy the stability of owning a property. At Loan Leaders of America, we want to help you make the right decision for you. Contact us if you are ready to buy, we’ll be there to help you every step of the way!
