To buy or rent? That’s not always an easy question to answer when it comes to deciding your living arrangements.
A lot of elements come into play, such as where you live and what long-term goals you have. Fortunately, there are calculators on a variety of websites that can help you decide which way to go.
Let’s take a look at some of the factors that play a role in this important decision.
- Size may matter, especially if you have a large family. It might be easier to find and purchase a four-bedroom, three-bathroom home than locating an apartment with the same dimensions.
- Length of stay tends to favor those who buy a house. That’s because upfront fees for a home purchase can be spread out over the course of several years.
- Whether buying or renting, insurance is necessary, so that’s basically a wash. That is, unless Private Mortgage Insurance, or PMI, is needed. This insurance is a percentage of the original mortgage loan amount added each year, and is called for if the down payment is less than 20 percent. It drops to zero in the year after the outstanding loan balance falls below 80 percent of home value.
- Home buyers have the advantage at tax time, when they can count mortgage interest and property taxes as deductions.
- On the flip side, home buyers have to put out money for closing costs, which cover a variety of fees. And they have to pay directly for maintenance, such as replacing an appliance or having plumbing repairs done. Renters indirectly pay for maintenance but the cost is spread out over time and among other renters.
- The cost of utilities — electric, water, sewage — tend to be lower for renters.
- Those property owners who are required to be part of a condo or homeowner’s association can expect to pay monthly association fees in addition to mortgage payments.
- Depending on where you live, it may be cheaper to rent than buy.
- Owning a home can be looked at as an investment, unless there’s a downturn in the housing market when you decide to sell. Generally speaking, though, homeowners can expect to realize a decent profit when they finalize a sale.
- On the downside for renters, they typically face an annual hike in rental fees, something that homeowners don’t have to worry about (although they may be hit with tax increases).
- Homeowners can take advantage of equity in their home to take out loans for such things as college tuition or a new car at a lower-than-average interest rate.
Of course, other factors may influence a final decision. But it’s wise to weigh all of your options before making your move. If you think you may be ready to buy a home, review our “Qualities of a Prepared Homebuyer” checklist, or consult with one of our Mortgage Specialists.