How to Decide Whether to Rent or to Buy Your Next Home
6 Questions to Ask Yourself Before Deciding: to Rent or to Buy?
It’s an age-old question that so many people face when they’re planning to move – should I buy my next home or rent? For many, owning their own home still counts as achieving part of the American Dream. For others, it is like a ball and chain, and one wracked with expensive responsibilities.
The truth is, there are arguments to be made on both sides of the aisle and this is why so many people have difficulty making this important decision. So, we’ve compiled a list of six questions you should ask yourself before finalizing your decision. The answers you provide should help you determine which type of home will suit you best.
#1: Do You Have a Stable Job and Life?
The stability of your life and your job are two important factors to take into consideration when deciding between renting and buying. You don’t want to take on the responsibility of a mortgage if you work in a declining industry, or if you feel your job isn’t secure. You also don’t want to buy a home if your personal life is in upheaval at the moment.
The last thing you want to have happen is to be forced to sell your home a year after buying it. Then again, if you work in a thriving industry and your personal life is equally stable, then buying a home might be right for you.
#2: How Long Do You Intend to Live in the Home?
Buying and selling a home are expensive and time-consuming endeavors. So, if you want to buy your home, you should be planning on living in it long-term. But, if you aren’t planning on living in the home or area for five years or longer, then renting a home might be a better option for you.
#3: If Your Circumstances Change and You Have to Live in the Home Longer, Would You Be Content?
Some people buy smaller starter homes with the hopes of selling and buying a bigger one a few years down the road. But, if the housing crash taught us anything, it is that the market is unpredictable. Should something like this happen to you, and you were forced to remain in your home for longer than expected, would you be OK with that? If you wouldn’t, then renting is probably your best bet.
#4: Do You Have Enough Money Saved for a Down Payment?
The amount you need to rent an apartment and the amount you need to put down on a home are two vastly different numbers. In most cases, you need to put down 20% of the home’s selling price when buying. Renting, on the other hand, typically requires a deposit, such as first and last months’ rent. If you don’t have the savings required to put down on a home, then you might have no other option than to rent.
#5: Do You Have Money Saved to Pay for Home Repairs?
Buying a home is not only expensive with its large upfront down payment, but it can also be expensive to maintain, with things like your HVAC system or roof costing thousands of dollars to repair or replace. So if you want to own a home, you also have to be prepared to pay for repairs and replacements.
This will require you to set up and keep an emergency fund. If you don’t have much money left over after your monthly obligations, then owning a home could be a money pit that you might have a hard time climbing out of.
#6: How Do the Monthly Costs of Each Compare?
Before you choose between renting and buying, it pays to review the actual monthly costs of each. For instance, how do your rent, renter’s insurance, association fees, and utility bills compare to that of owning a home, which comes with property taxes, HOA fees (in some cases), insurance premiums, utilities, and maintenance costs, in addition to the mortgage?
These questions aren’t difficult to answer, but answer them honestly and you will be well on your way to choosing the right housing option for your lifestyle.
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