Should I rent or buy a home? It’s a dilemma as old as time and, the truth is, there are benefits to both. Your housing costs will likely make up a majority of your recurring expenses, so this is no small issue. Here are a few key questions to ask yourself to help determine what’s right for your unique situation.
What is your budget?
While rentals are often touted as the cheaper option, the reality will depend on your market and home of choice. While it’s true that you won’t need a down payment if you’re not purchasing, most renters are more than familiar with the first month/last month plus deposit routine that may still require a large upfront payment. Tenants may also have to pay more for parking, pet rent and other perks. In some locations, rent prices may rival a monthly mortgage payment.
Most homeowners will need a chunk of change on hand for a down payment. If you qualify for certain programs like a VA loan (U.S. Department of Veteran Affairs), you may not be required to make a down payment. Homebuyers will also be charged a monthly mortgage payment made up of principal and interest amounts throughout the life of their loan. This payment amount may change over time based on loan type, property taxes and homeowners insurance. Don’t forget to add up potential hidden costs, such as homeowners association fees, closing costs and insurance fees.
To get a clear picture of your potential homeownership costs, use a calculator tool like Freddie Mac’s.
What is your timeline?
Homeownership can help promote long-term stability while renting may be the better choice for nomads. If you look to the not-so-distant future and could see yourself moving to a new city, taking on an unpredictable job or just waffling on which neighborhood is right for you, you may want to rent for the time being. Finding a flexible and affordable home option would free up time for you to determine what you like, speak with the professionals and explore all purchasing options.
On the other hand, if you’re ready to put down roots, you may want to purchase. Staying in one home for an extended period of time will build equity, meaning you might pocket more money when it comes time to sell. Plus, if you lock in a fixed-rate mortgage, you’ll never have to worry about rising rent prices! Once tax season rolls around, you may even be eligible for certain tax benefits (Internal Revenue Service).
How comfortable are you with home maintenance?
Home repairs are a fact of life either way but when renting, home maintenance work and the associated costs are typically covered by the landlord or management company. Broken windows, faulty washing machines and, in some communities, even dead lightbulbs can be purchased and replaced at your convenience. So, if you’re a particularly hands-off person, you may enjoy the comfort and convenience of renting!
When the home is your own, however, you’ll likely be managing all repairs and ongoing maintenance. If you’re especially handy or can afford to hire a handyman, this may not be a major deterrent. Just don’t forgo the home inspection!
What are your goals?
When making any large financial decision, you’ll want to think long and hard about long-term goals. What does your current life look like and how might it change in the coming years? If you’re going through a divorce or doing some major downsizing, consider renting until you’ve adjusted to your new lifestyle. Or, if you find your current budget just doesn’t allow for a home purchase, rent and save until you have some more flexibility.
On the other hand, if you’re getting married or growing your family, check out properties that will still feel like home in a few years. If perhaps homeownership is simply a priority for you, get to purchasing your piece of the American Dream!
Should I rent or buy a home?
At the end of the day, there is no right answer. Every household’s situation will look a little different, but your budget, timeline, capabilities and goals can help clue you into the right choice for you, right now. If you still can’t quite decide, it never hurts to contact a few experienced homebuying professionals who can share in-depth insight on your specific situation.
Published on June 7, 2021
