Purchasing a home is a major life move. While homeownership is synonymous with stability, it also comes with a long-term commitment and high expenses. So, if you are still renting and wondering whether it is time to buy a home, there are many factors to consider. Here are some of them.
Consider your lifestyle and future goals
Your lifestyle, career, family, and future goals are your guiding forces when deciding whether to buy or rent a home. For example, some people prefer the flexibility that comes with renting. You have the opportunity to move to a different property if, for whatever reason, the current one does not work for you. If you prefer a nomadic lifestyle, renting is a more logical option. Moving out of a rented home is faster and cheaper than selling a house.
However, you cannot dive into any home renovation projects without the landlord’s approval. Renting can also impact your overall lifestyle. For example, the owner can decide to sell the home and boot you out. Buying a house comes with higher security. Once you become a homeowner, you can renovate the house and make it feel like a home. While you are paying for the home maintenance costs, you have control over them. However, saving up for a deposit is challenging and takes lots of time. While you will have to pay your mortgage for 15 or 30 years, there is no guarantee you will get a high ROI. That being said, if you’re looking into purchasing and want to learn HOW to calculate ROI by learning to invest, check out ADPI’s Military Real Estate Investing Academy.
Calculate the Costs of Buying vs. Renting
One of the biggest misconceptions about renting is that it is a waste of money. Both homeowning and renting come with certain expenses.
The Costs of Buying a Home
When deciding to buy a home, you first ask yourself whether you have the funds for it. Just because you can afford a monthly mortgage payment does not mean you can buy a home. Some additional costs you will need to cover are:
- mortgage insurance
- property taxes
- homeowners’ insurance
- HOA fees
- legal fees
Keep in mind that monthly home-related costs vary. For example, do not neglect the ongoing home maintenance expenses. Unexpected issues, such as plumbing problems or roof damage, happen. You will need an emergency fund to cover these expenses.
Consider how much you plan to stay in the same place
Ask yourself how long you plan to stay in your particular area. If you like your city, have a stable job, and live in a nice neighborhood, it may be time to put down some roots. Purchasing a home is an investment, both in the financial and emotional sense.
However, if you are moving to a new area, buying a home can be a high-risk move. Say you are moving from New York to Midland, Texas. Before purchasing a home, you may want to explore different neighborhoods, understand cultural differences, and research job opportunities. If the number don’t work to purchase, consider finding Midland apartments for rent and potentially investing elsewhere.
The Costs of Renting a Home
Renting can be cheaper than purchasing a home since it eliminates most of these costs. You only need to take care of your monthly housing and utility payments. Some upfront costs you may need to cover are application fees, security deposits, and moving expenses. That way, you can free up your budget and diversify your investments.
However, keep in mind that renting fees vary. They often skyrocket due to the growth in property prices. Therefore, you may face unexpected rent surges each time your lease expires. If you live in a fast-developing neighborhood, rent increases can be high. In that case, paying a mortgage may make more sense.
Assess your Financial Situation
While homeowning is a long-term investment in your future, it is also an immense financial responsibility.
Are You Comfortable with the Costs of Owning a Home?
Once you estimate the abovementioned expenses, ask yourself whether you are comfortable with them. Can you cover upfront and ongoing costs, such as a down payment, moving, buying new furniture, renovation projects, or repairs? Once you add them up, you may realize that you are better off by renting.
Do You Qualify for Lower Mortgage Rates?
Find out whether you qualify for a mortgage. The goal is to secure the lowest rates and the best terms on mortgage loans. Many factors impact how much you can borrow, including your debt-to-income ratio, loan-to-value ratio, and credit score.
Based on your financial state, you can choose a fixed-rate loan or an adjustable one. While the 30-year fixed-rate loan is more affordable, you will pay more interest over the years.
If you’re looking for a lender to go over loan qualifications and answer your questions, Active Duty Passive Income has an amazing in-house lending team to help! You can fill out the inquiry form to get connected with a lending team member
Over to You
So, should you rent or purchase a home? There is no straightforward answer to this question. It depends on a wide range of factors, from your financial situation to your family status.
These insights are just the tip of the homebuying vs. renting iceberg. Whatever decision you may choose to make, ensure it is informed and realistic.
About the author: Mike Johnston is an experienced blogger and editor with a background in creative writing and digital media. He’s a regular contributor to numerous blogs and online publications where he writes about business, real estate, home improvement, and interior design.