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Is It Better to Rent
or Buy a Home?

Before you move, determine whether it is better to rent or own. Examine a few of your circumstances and understand the requirements of a home loan.

What is the Difference Between
Buying and Renting a Home?

If the lease is up, it’s time to start looking online for vacant apartments or homes for rent. Maybe you’ll need to interview some potential roommates. If you are considering purchasing a home, that’s great. You are probably feeling ready for a big change. Your next steps include getting in touch with a lender, beginning the pre-approval process, and starting your house hunt with a realtor. Before you start any of this though, you need to figure out what is best for you.

If you want this to be the last time you move, then it might be the best time to buy a home. The truth is that not everyone can manage a mortgage, so you need to know if you should be confident in your decision. Renting and buying a home both come with pros and cons.

Renting is an expense that is consistent because you aren’t surprised by repair expenses, but unpredictable because once your lease is up, you are at the mercy of your landlord. On the other hand, purchasing a home gives you the freedom to design everything yourself, but you’re locked into a lifelong mortgage. True, your house gives you the ability to invest in your future, but like all investments, it can be a risk as well. If you want to know what is best for you, well, let’s start with what it means to rent.

Should I Rent
a House?

Ownership is ingrained in America’s DNA. Ever since the first settlers who landed here with the dream that they could establish a life free of persecution, we believed in the power of ownership. While most people agree now that owning a home comes with many benefits, their argument that renting is “throwing away money” is incorrect.

The reality is that renting is not a waste of money. You are paying for a place to live. Although you aren’t investing, you are borrowing a piece of property, and that is always going to cost you. Plus, the property owner is assuming the risk if anything breaks in your home, and that saves you money.

Sometimes homeownership is simply too expensive or not the right decision for your lifestyle. Purchasing a home is a huge decision and one that you should make with full confidence.  If you feel like you’re not ready to settle down or if it would strain your finances too much, renting may be a better choice.

Depending on the area you live in, renting could be significantly cheaper than owning a home. This rent gap is standard in many cities throughout the United States. This study shows that in many major Metropolitan Cities across the country, it is cheaper to rent.

You can look at a specific area or property as well. If the study doesn’t mention your city, you can compare the estimated rental price against your estimated monthly mortgage payment.

In either case, renting does not come with the associated taxes, fees, and expenses that homeownership does. If something breaks, such as A/C, you won’t have to pay for it. Unlike with homeownership, you also won’t have to worry about your property losing value if you rent.

Additionally, renting could have fewer upfront costs. Instead of dropping thousands of dollars on a down payment, you could invest in high yield stocks or a conservative savings account. You also have the flexibility of being able to move out after your contract expires. This flexibility could be great if you are in a profession that requires you to travel a lot.

Although you won’t have to pay for repair expenses, on the flip side, your landlord may not complete the repairs as well or as quickly as you’d like. I’m sure you’ve heard friends, or maybe you’ve caught yourself complaining about a slow or unresponsive landlord. If you are renting, you might also face unpredictable rent increases. In most cities throughout the country, local governments may not protect renter’s rights the same as homeowner’s rights.

If you live somewhere with stereotypically thin walls, living in an apartment complex can come with additional challenges as well. You may never be able to escape your neighbors crying baby unless you move. Noise complaints aren’t a common concern you would have in a typical suburban home.

Unless you purchase a home of your own, there are going to be some unknown variables with your living situation. Your landlord could decide to sell at any time, and that would force you to move. Owning your own home could provide you with the confidence that your living situation is stable and secure. Although the reality is there is uncertainty in both situations, owning your home is a better way to secure your future.

Should I buy a House?

In recent years, the dream of homeownership seems to have a counter-culture movement. Blog articles online decry the idea of homeownership. Meanwhile, the trend of homeownership continues to climb.

Buying a house can have some tremendous benefits, but it’s not always the right decision. Before you buy a home, you should consider if you are financially prepared and committed to the area you are looking in. Buying is a milestone in anyone’s life, but it is also a huge commitment.

There are intangible and financial benefits associated with buying a house. In addition to the potential tax deduction, and appreciating equity, you can feel safe and secure in your own home. There is a certain feeling of comfort that comes with your own home. Ultimately, if you have a family, you want them to have that comfort—a place they can always count on.

Even though the dream of homeownership is a very real one, you have to consider some of the benefits and disadvantages of buying a home.

As mentioned above, there are many benefits to buy vs. rent. Some possible financial advantages include receiving a tax deduction and growing equity. If you itemize on your taxes, you may be able to reduce your overall taxable income. Also, some tax credit programs can help you get money back on all the interest you paid towards your home.

In addition to the financial benefits, you gain greater creative freedom if you decide to buy. You can transform the space however you like. Don’t like those walls? Tear them down! Are you feeling like a splash of pink? Splatter away!

Of all of your investment options, buying a home is one that includes a significant amount of intangible value and psychological benefits. When you are your landlord, you are investing in yourself. I’m sure you can also imagine the feeling you get when you make that final payment on your property. Stability and security are hard to put a price on.

A home takes time to mature though. It’s a secure investment, but it may take years for you to see your value returned.

A mortgage is not a liquid investment. Unlike a savings account, which begins growing right away, you can’t take your money out whenever you need it. That means as an investment opportunity, a home isn’t going to make you money immediately. In truth, you won’t be able to access the monetary value of your home unless you sell or refinance.

Also, you should consider the time it takes to pay off your loan. You only begin paying down your principal more and more as the loan matures. Plus, as a homeowner, you have added monthly expenses in addition to utilities and your mortgage. Mortgage insurance, homeowner’s insurance, additional taxes can all increase your monthly mortgage payment. Not to mention the costs of repairs or new appliances, which can sometimes be unexpected. Unless you use a Down Payment Assistance Program, a home purchase has many upfront costs associated with it as well. Your down payment alone requires thousands of dollars, and in addition to the down payment, you’ll need to pay some fees and closing costs.

There is also a certain amount of risk with the housing market. Unpredictable events can cause the market to fluctuate, which could affect the value of your home. There is no guarantee that there will always be an opportunity to sell or refinance.

Homeownership is a dream for many Americans, but the upkeep of your home requires your time and energy. There are additional time costs if you decide to buy your own home. To maintain the beauty and functionality of your home takes work.

Purchasing a home can cost both time and money, but in the end, you have a warm place to sleep at night, and that kind of value is indescribable.

Rent Vs. Buy Calculator

Something that can help you decide if you want to rent or buy in a particular area is a buy vs. rent calculator.

There are different calculators that you can try. Nerd Wallet, Trulia, and The New York Times all have a version of this calculator that can help you make a decision.

The methodologies used in these calculations account for inflation, and factor in expenses associated with buying a home. However, they are not an exact estimate, and in some cases, it will never be less expensive for you to buy a home.

Though they are a reasonable estimate of whether or not renting in a particular area is ever going to be cheaper, rent vs. own calculators have very general guidelines.  When considering purchasing a home, you should always consult a professional.  An On Q Mortgage Consultant is available to help any time!

5 Things to Consider When Thinking About Buying vs. Renting a House?

Sometimes it is merely ill-advised that you get yourself into a large amount of debt. If you are unable to afford a down payment without depleting your entire savings account, it may be best to consider renting for some time. Renting can then give you a chance to save up more money that will provide a more comfortable and confident step into homeownership.

On the other hand, if you are in the position of needing somewhere to put your money, to invest in a piece of property may make financial sense.

To decide on whether you should look at renting or purchasing a property, you should first consider the location because in some areas it is simply cheaper to own. For instance, in cities such as Philadelphia, Detroit, and Pittsburgh, it is cheaper to own according to the Urban.org.

However, in other cities across the country, this also means that it is cheaper to rent. In some cities, the difference is by as much as 40%. Investigate prices in the area, and compare the mortgage of an average priced home against the average rent. There may be some excellent reasons to rent if you live in an expensive city like San Francisco or New York.

In a buyer’s market, you have better leverage over the seller. A professional lender or realtor can help you determine what type of market you are shopping in.

No crystal ball will 100% accurately be able to tell you where the market is going, but we do know that if the market is down, then it might be a good time to buy. Sometimes the decision to buy or rent simply comes down to opportunity. You may not want to miss out on a chance if the price and location are perfect.

Before you choose to rent or buy, you should consider the reason for your decision. What are you hoping to gain out of your purchase? Privacy and security are two major benefits of buying a home. Buying means you won’t have to worry about someone like your landlord surprising you with a visit.

It also means you will have a consistent place to call home. Although it may cost more upfront, once you pay your home off, you won’t have to worry about a monthly payment, and you will have a stable place to live. The confidence to know that you’re safe and secure can be priceless.

Ultimately you are going to have to make the decision that is going to be the best one for your family. If your family is ready to settle down, purchasing a nice piece of property that you can make yours is going to be great for you and your kids. Stability is essential as children grow up.

In Conclusion

Buying a home can give your family a lot of value. Ownership can help you build a vast amount of wealth over time, and provide you with access to tax deductions and other benefits. Homeownership also gives you more freedom and security. Although there are a lot of good reasons to buy a home, it isn’t the right choice for everybody.

Your circumstances are going to help you figure out whether or not you should buy a home. The most meaningful circumstance you should consider is your financial situation. This is a significant factor because purchasing a home costs a good deal. Unless you are financially prepared, you could easily end up underwater. Buying a home should be one of the most exciting times of your life, and it’s important to consider all factors to make a responsible and educated decision.  An On Q Financial Mortgage Consultant has the knowledge and experience to help you!