If you’re looking to make a move soon, you may be faced with a common question—to rent or to buy? When determining whether or not to continue to rent or if you’re ready to become a homeowner, there are a number of factors to consider. Below, we’ll walk you through the pros and cons of both to help you better make your decision.
The Pros and Cons of Renting
You already know the first rule of real estate—location, location, location! If big-city living is a priority for you, it may be worth the cost of renting to be able to live near all of your favorite places. However, unless you live in an area with rent control laws, your landlord will have the ability to raise your rent when it comes time to renew your lease. Homeowners with a fixed-rate mortgage make the same payments each month, regardless of what the market does. Those who are in the early stages of their career may find renting to be the best option until their professional life becomes more stable. When you rent, relocating may be less time-consuming and costly if necessary. If your credit score is a little on the low side, renting may be best while you work towards getting your score improved. While most landlords do require credit checks, it is typically not as high of standards as a mortgage lender.
The Pros and Cons of Buying
You’ll be paying to live somewhere no matter what. But unlike renters, homeowners are building equity with each mortgage payment they make. Every dollar you put towards your loan’s principal balance represents a step closer to actually owning your property. However, building equity isn’t necessarily automatic profit. If home value’s decrease in your area, dragging down your home’s appraised value, you could risk a loss when you go to sell. You can boost your home’s value through certain home improvements. Projects, like paving the driveway or adding a deck, can add extra money in your pocket down the road by adding more curb appeal to your home. And speaking of home improvements, as a homeowner your DIY projects and painted walls answer to no one (provided they don’t violate any HOA rules.) Updating your living environment to suit your style is a fun aspect of owning a home – and generally not available to renters. As a homeowner, you will be responsible for any and all maintenance work around the home. Unlike renting, where you can call your landlord up anytime your stove goes out, you will have to have an emergency fund set up for any unexpected repairs.
So…to rent or to buy?
After weighing all of these factors, it will likely come down to what will make you happy. While renting does have its perks, owning your own property will build a better financial future in the long run. When comparing the two, renting often seems less expensive, especially during the early years of a home purchase—but the path to financial stability is a marathon, not a race. As time passes, you will begin to build equity and increase your net worth with each payment towards your mortgage. Home buying may cost more upfront, but the long-term return on investment may be worth it. However, if you’re looking for a downsize with the appeal of less maintenance, renting may be your best bet.
Are you ready to be a homeowner?
Speak to a Loan Officer today!
By Meagan Rochard Sources www.nerdwallet.com www.moneycrashers.com