Should You Rent or Buy a Home?
With the increase in rental rates and property prices, it is becoming more challenging to determine if buying a home is the way to go. According to CNBC, California is #2 of the Top 10 most expensive state to live in 2019, so if you are an average working citizen, is it better to rent or buy a home? Honestly? There is no real answer to this question. Renting vs. purchasing is a decision that should be made based on the needs and finances of the individual.
Buying a Home vs. Renting—The Advantages of Each
When you are deciding whether purchasing a home or renting is right for you, there are a few things to consider. As we all know, owning your own home is the “American Dream,” but is it a reality? Deciding to rent or buy comes down to what you can afford. The first thing you should do in determining if you should rent or buy is to figure out what you can afford. You should take the time to do a delve deep into your finances. When assessing what you can afford, you should ask yourself the following questions:
Your Financial Health Questions
- Do you have any debt?
- Do you have enough cash for a down payment?
- Have you talked to a lender to see if you can get pre-approved for a loan?
- What is your debt to income ratio?
- Have you considered the expenses of owning a home?
Once you have looked at your finances, now is the time to determine if your lifestyle allows for the purchase of a home. Do you plan on living in one place for over three years? Does your job require you to travel and move around? Does the average property price in your area match what you can afford? Etc. There is no right or wrong answer with determining if you should rent or buy, but here are some benefits of renting and buying to help you with your decision:
Advantages of Buying Your Home
- Tax advantages
- Mortgage money paid helps build equity and eventually full ownership
- Your home will increase in value over time
- Helps create long-term wealth accumulation
- Rental investment opportunity
Advantages of Renting a Home
- No extra cost for property taxes, insurance or maintenance
- No mortgage commitment
- No down payment needed
- You will have time to plan if you want to purchase a home
- Freedom to move, if needed
Conclusion—Buying a home versus renting is a personal decision that can only be made by you
When making the final determination, you will want to do your research in the area in which you wish to live. Speak with a mortgage broker to see what you can afford. Find out if you can get pre-approved for a loan. Don’t forget to take into account such costs as property taxes, homeowners insurance, routine maintenance, and surprise repairs. Again, there is no right or wrong decision when it comes to renting vs. buying; the determining factor is you, your needs, and what you can afford.