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Are You Better Off Renting or Buying?
Buying a home is a big, exciting decision, and there are a lot of great reasons to go for it – in addition to the natural pride and satisfaction it brings, as a homeowner you’ll typically be able to build up your personal equity, potentially get tax breaks, and redecorate and renovate any way you like (time for that orange shag carpeting to finally meet its maker). Still, buying a home right now isn’t always the best choice for everyone – depending on your plans for the foreseeable future, it may be that for the time being you’re better off renting. We’ve got some excellent tips that will help shine a light on which decision will the right one for you.
Additionally, your ZipRealty REALTOR® will be able to give you a more detailed perspective – we encourage you to contact them for a candid conversation on this (or any other real estate related) topic. They’re your eyes and ears into your local real estate market, and can provide valuable insights into local market trends to aid you in your decision.
The Financial Timeline of Homeownership
Assuming your finances are in order and you’re able to get a loan you’re comfortable with, the decision to buy or rent essentially boils down to what your plans are for the foreseeable future.
Short term
Typically the first year of homeownership is the most expensive (not counting the upgrades or repairs you may want to make to your home down the line). Your mortgage payment will likely be more than your current rent – assuming you want to buy in a similar area and home style – but more importantly, that first year you’re also responsible for a handful of one-time expenses, such as your closing costs and moving costs.
Because of these one-time expenses, if you think you’re going to be moving again in the next few years, now may not be an ideal time for you to buy a home. While property values tend to go up over time, if you sell just a few years after buying, your home probably won’t increase in value enough to cover the additional one-time expenses, and you may end up selling at a financial loss.
Long term
Typically, the longer you own a property, the more financially beneficial it becomes. Why? Well, as you likely know, rents tend to rise – but if you have a fixed loan, your mortgage payment won’t. This means that eventually, your mortgage payment will be lower than rent for a similar property.
If you’re planning on staying put for the foreseeable future, then buying a home could very well be the right decision for you. Like most things, the value of property typically increases over time, which is how many homeowners can eventually sell their home for more than they bought it for. If you see yourself as a long term homeowner, then it’s more likely you’ll be able to sell at a financial gain.
Do the math
Use this calculator to help you determine if buying is the right decision for you – simply input the actual assumptions for monthly costs, and we’ll do the rest.
Talk to a Local REALTOR®
Like anything, there are plenty of exceptions in either of these situations – from your local housing market, to the style of home you’re interested in. Buying a home is a hugely personal decision, and it’s recommended that you speak with your ZipRealty REALTOR® - a local real estate expert who can help you understand today’s market trends and make the decision that’s right for you.