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Renting vs Buying A Home
May 16, 2018 | Cicely Truitt
You may have just recently decided that you are finish with renting and are starting to realize that it's now time to go out on your own. Buying a home versus renting a home may seem like the reasonable next step but you have to be sure that you have done the work to ensure that you are ready. After you've crunched the numbers you might find that in some locations, a mortgage payment would be about the same amount as paying rent except...at the end of your mortgage, unlike the end of your lease, you now own your home.
Crunching the numbers
So what does that mean for you? Renting versus buying is a very personal choice. But set emotion aside. As soon as you get a mortgage, you become a real estate investor. You're building your portfolio every month, paying the principal of that house and building long-term equity.
However, it's not simply an apples-to-apples comparison between your current monthly rent and what a potential monthly mortgage payment will be. When you're buying a house, you do want to have some money set aside for repairs and maintenance, which is something renters generally don't have to worry about.
Financially, it might make more sense for you to rent than buy. If your rent is less than a mortgage in your area, you can use your money toward a better quality of life. On the other hand, as a single person, it's also nice to have a landlord to fall back on, like when your hot water keeps disappearing and it turns out you need a new water heater. For both choices you won't know until you take a look at the pros and cons.
Take a look at some of the pros and cons of renting versus buying a home to help you determine what's most important to you, and what's best for your finances:
Renting a home Pros
More flexibility to pick up and move
Less financial risk
Minimal responsibility for maintenance costs
You're not investing in yourself
Restrictions on décor and design options
Many renters are not allowed to have pets, or pay a premium if they do
A landlord could raise your rent or sell at any time
Buying a home Pros
Financial security for the future
Tax benefits, i.e., mortgage interest deductions
Establishing "roots" in a community
Potential to earn rental income if you buy a multi-family home
Your home, your rules when it comes to pets and décor.
The responsibility and obligation of a mortgage
If you choose to sell in a down market, you could take a loss
Additional costs associated with buying a home, i.e., moving and closing fees
Responsible for all repairs and maintenance
If you're still trying to decide, consult with a mortgage professionalwho can help you examine your finances. If you find out that you might not be ready to buy, you will at least walk away with the knowledge of what you need to do to be ready. As for determining if you're content with renting or willing to take the plunge into home ownership? Do some soul-searching and research so that whatever choice you make, you know it's the best one for you.