Your career is taking you to a new city. Your family is growing. There isn’t enough room in your current place. A question you can’t overlook when there’s a change in your living situation is: “Is it better for me to rent or buy a home?” It’s an age-old debate, and in an ever-changing housing market, you may feel unsure of what is best for you.
If you can’t decide whether buying or renting a home is right for you, don’t worry! To make the decision easier, here are five things to consider when trying to decide if it is better to rent or buy a house:
Finances are the most significant factor when deciding between renting and buying a house. Before you jump into your homebuying journey, you should know exactly how much home you can afford by reviewing the whole picture.
The upfront cost of buying a home is one of the biggest barriers for many would-be homebuyers, and it’s essential to consider these as you make your decision. Initial costs include the down payment, closing costs, moving costs, repairs not covered by the seller if you’re purchasing a resale home, and furnishing your new space.
Don’t worry! There are plenty of ways to save for your first home. Often, renting is a great way to save money so you can cover these initial costs, pay down debt, and build up your savings. Setting aside money so you have that desired 20% down payment (which eliminates that pesky private mortgage insurance) is often made possible by choosing to rent until you’re ready to buy.
Owning a home is more than just a monthly mortgage payment. When creating your budget, you need to consider the full scope of expenses of owning a home – factor in homeowner’s insurance, property taxes, maintenance, and potential homeowner’s association fees.
When you own a home, you’re responsible for everything. Is there a large lawn to be maintained? Is there a pool that needs regular service? Do you need to pay for trash and recycling services? Will you need to pay for snow removal? Is the roof in good shape, or will it need to be replaced in the coming years?
While these numbers may seem intimidating when you compare them to the cost of rent in some areas, it’s important to remember that homeownership is a marathon, not a sprint. The benefits of buying a home grow the longer you stay.
As the years pass, your home’s equity and value build. Less of your mortgage payment goes toward the interest and more toward the principal balance. Even if the home you buy isn’t your “forever home,” if you stay for a few years, the value of your home will have appreciated, and you’ll likely have more money in your pocket when you sell.
If you buy a home, you can take advantage of tax benefits. You can deduct mortgage interest and property taxes on your federal income tax returns, which can result in significant savings. Depending on where you reside, additional tax breaks may be related to home improvements or energy efficiency upgrades.
Compared to rent payments that go directly to your landlord and nowhere for you, owning a home can be cheaper in the long run. Once you’ve locked in your mortgage, you know what your monthly payment will be throughout the life of your loan. Over the past two years, rents have increased substantially due to the aftermath of the pandemic and general economic unrest. Add in the ability for your landlord to raise your rent after the term of your initial lease, and there’s a lot more uncertainty surrounding your housing cost.
If homeownership is a goal you have been working towards, you have the down payment saved, and you can qualify for a purchase amount that will get you the home and location you desire without extreme financial stress, then buying makes more sense than renting. If you have other goals, such as getting out of debt, and the rental rates in the market are affordable, it pays to keep renting.
If you don’t have enough money for a required down payment, an emergency fund, or have a poor credit score, you may feel homeownership is a long way away. Plenty of common credit myths may be skewing your perception if you’re ready to buy a home or not. While renting may be a better option for you short-term, there are ways to buy a house with bad credit while you work to fix your credit.
You’ll often hear the phrase “location, location, location” when discussing real estate. It’s the only thing you can’t change about a home, so it’s an important consideration whether you’re deciding to buy or rent. If you’re searching in a highly-desired market with prices that reflect its popularity, renting may be your most affordable option.
Suppose you’re searching in a market where you have the choice to rent or buy. In that case, you need to consider the cost of living in the area, the proximity to work, schools, public transportation, and amenities important to you, like shopping, dining, entertainment, or outdoor recreation.
Even if the area is affordable, you must decide if it’s somewhere you want to be for a long time. If you’re only planning to live in the area for a short time and have goals of moving elsewhere down the road, renting may be a more practical option.
How do you live your life, and what makes you feel best? Certain intangible things will play into your decision of buying versus renting. If you love the ability to get up and travel at a moment’s notice, you may not want to feel tied down to a home, and renting is a better fit for you. If you prefer stability, having a landlord that could end your lease or drastically raise your rent may not be for you.
Does HGTV have you daydreaming about home design? Buying a home you can personalize however you desire may be your best option. Designing your Brookfield Residential home with your selection of flooring, hardware, cabinets, backsplash, and more may be more appealing than repainting your rental upon moving out.
Your personal and professional 5 to 10 year plans should be taken into account. If you’re hustling to climb the corporate ladder and are willing to relocate wherever necessary to make that happen, you’re better off renting. If you plan to settle down and start a family, buying a home may provide more stability and long-term benefits – especially in a good school district.
The current state of the real estate market should be considered when deciding between renting or buying. Inflation impacts the cost of rent and interest rates when taking out a mortgage. If fluctuating interest rates make you nervous, taking advantage of an interest rate buydown can help ease your mind.
The decision to rent or buy ultimately depends on individual circumstances and priorities. Whatever your decision, home is where the heart is, and there’s no right or wrong choice when finding the best place to call home.
Check out the Brookfield Residential blog for more design advice, homebuying insights, mortgage tips, and more, including how to finance a new home and debunked homebuying myths. You can also explore where we build and connect with our sales team when you’re ready to learn more. We’ll be expecting you!