We are frequently asked for advice on the subject of renting versus buying a home. People hear rumors floating around, but they want solid advice from someone in the industry to set the record straight. Here’s some helpful advice to steer you in the right direction.
When Would You Want to Buy a Home?
It’s a good idea to think about buying a home when you plan on spending five years or more in an area. This advice is given on the basis that renting is just about as expensive as paying a mortgage these days. If you’re spending that much anyways, why not be putting that money towards the purchase of your own home, rather than throwing it into a bottomless pit that could evict you?
So instead of paying for someone else to continue to own the home, put your money into an investment that will eventually let you get your own. And if after five years you decide to move, your property will likely have increased in value, meaning that you can sell the house and earn something of a profit off of the sale, which could be put into a down payment for your next home).
When is It Best to Rent?
There are a few situations where it would be better to rent than to purchase. The majority of them can be categorized into two main points though.
First, you don’t plan on staying. If you’re only going to stay in an area for under five years, your property isn’t likely going to appreciate enough for it to be worth the hassle of buying and selling a home. It’s a long, expensive process that isn’t worth the time. The situation gets worse if you run the risk of having to pick up and leave at any moment. Getting out of a lease is much easier (and cheaper) than trying to get out of a house (which could take months).
Second, you can’t afford to pay for a mortgage. If you only have the money to live in a cheaper rental, then don’t try to go in for a mortgage that you can’t afford. Wait until you can afford the price of a mortgage at a decent interest rate and then go in for your own property. It’s perfectly okay to rent while you aren’t making enough money for a mortgage.
So when you have the financial means and plan on sticking around for a while, buy a home. You may have to sell it before the mortgage is up, but it’s pretty difficult to lose when you invest in real estate. That’s especially true if you’d just be paying the same price in rent for someone else to keep their home.
When you can’t afford a house, or you could pick up and leave at any moment, the freedom of renting contracts can be exactly what you need. Examine your future and make an informed decision.