There are also tax savings to being a homeowner, especially if you are a first time home buyer. According to the same NAR report, a homeowner’s payment will be less than a renter’s payment after 3 years.
3. What Are Your Future Plans?
Even with meticulous planning, it’s hard to predict what can happen next in your life. But if you have some idea of where you’d like to be and do with yourself for the next 5-10 years, ask yourself does buying a home fit into that plan? For example, if you intend to stay put in one place for at least 5 years and have the financial means to do so, buying a home probably makes the most sense.
However, if your current life situation offers no hint of stability for the next few years and your housing needs might change, you may want to wait on buying a home. Plus it will give you time to figure out what you do want for the next few years and how to save up and prepare for possibly buying a home in the future.
4. Risks to Renting and to Buying
Like with practically everything, there are risks for both renting and buying a home that you need to keep in mind. While it’s true, you can build equity when buying a home, it’s not a risk-free process. For example, because building equity takes time, if you sell your home sooner than planned, you may not recoup what you spent in closing costs or renovations when you first purchased the home.
And then there are the home maintenance costs. These are expenses you’ll need to pay to keep the home in top condition. Think winter maintenance, blowing out sprinklers, checking air filters and vents, testing fire alarms, landscaping and fixing plumbing issues, among other repairs that can pop up from time to time.
If you’re focused on other life goals, like a career that requires you to travel often, or if you have multiple young children to attend to, adding home maintenance to your list of responsibilities may not be the best choice. Some people love handy work around the home but if you have a career or a young family that needs a lot of your attention, you may want to reconsider owning a home unless, of course, you can pay someone else to do those things for you!
5. Affordability
Last but definitely not least, is affordability. Can you afford to buy a house right now? When considering whether or not you should rent or buy a home now, it comes down to whether you can financially. We want you to understand all the pros and cons to home buying vs renting and you should be realistic about what you can and want to do.
You also need to take into consideration what the market is doing and what projections are for the near future if you decide to wait.
As we speak, here in 2022, the demand for housing is still very high and there are still relatively few houses up for sale. This means that house prices are high and while they may not rapidly increase like they did in the last 2 years, they will continue to go up for a while. The benefit to buying right now would be to take advantage of the relatively low mortgage rates and the fact that those are projected to increase. Wait too long though and increased home prices along with higher mortgage rates = higher monthly mortgage payments.
Other key factors that influence affordability include the location and the prices of other homes or rentals in the area you wish to live. You’ll also need to consider your credit score and if a lender would find you creditworthy unless you can pay cash upfront.
Once you’ve factored in the home’s purchase price, down payment and closing costs, as well as a monthly mortgage cost, compare that to the monthly cost of rent and projected costs over a period of time, say 5 years. With that comparison, you’ll be able to see the differences between costs as well as the perceived equity you would’ve built up in a home.
Either way, careful budgeting will help you succeed no matter what you choose, rent or buy.
To Review: Here are some Pros & Cons to Renting and for Buying a Home