Should I keep on RENTING or is it time to BUY?

Are you trying to decide whether to keep on renting or buy a house? Let's discuss when it's better to one or the other and why is not a black and white answer but there is a lot of grey area!

[Keep reading or watch the video instead on YouTube]

When is it better to Rent?

• You have no savings built up. 3 to 6 month emergency fund of EXPENSES not income should be saved before you start saving for a down payment.
• You don't plan to stay in the area long, you're new to town, prefer to move often, or starting a new job/career. Less than three years is not a good idea to buy. 5-7 years is a good time to be a homeowner, but more than 10 is best. This will also affect your capital gains, as you need to be in a home 2 years to avoid paying them.
• You don't have a down payment or closing costs saved up. If you qualify for a RD/FHA/VA loan which don't require down payment and you qualify for grants for closing costs, this is not a need for you. However, you will pay less interest over the life of your loan if you have a higher down payment to start. FHA loans still require 3.5% down payment, and you will pay PMI if you have less than 20% down payment.
• You have debt-credit cards, student loans, car loans. Not only will it be harder to pay these payments if you are buying a home, but your lender will also be looking at your debt-t-income ratio when they qualify you for a loan. If your debt is too high compared to your income, you won't be able to get a loan or you may have to pay a higher interest rate.
• You haven't been in a relationship long (if you are buying with another). Even if you are not married, you may be looking at buying a place together. If it is a new relationship, measure your level of commitment and see if this the step you are ready to take. Or is it better to test the waters with a rental?
• The market is a seller's market. Meaning it is hard to find a home or prices are high. If you aren't in a hurry to buy, it might be better to rent for a while and wait for the market to change so you can get a better deal. Consider the rent you will be spending while waiting on the market when you consider this.
• You aren't sure if you want to buy a home or know how to care for a home or aren't certain you can afford to maintain a home. There are plenty of tips about maintenance of a home online, but you also need to budget for maintenance. There will be small and large expenditures along the way.
• You are being pressured into buying a home by family, a significant other, or due to your age. No pressure is worth that stress; buying a home is a big decision and should be considered with thought and care.
• You don't have a stable job/income or good credit or because of these and other issues you can't get good terms for a loan. Likely these would all be good reasons to wait until you feel more comfortable to make a long-term commitment to a home and ownership.
• The home purchase price vs rent ratio doesn't make sense. There are calculators available which may help you make the decision about whether the time is right for you to spend your money on rent or a mortgage payment. There are some who say you can get a better return on your investments if you continue renting and use your excess funds to invest in the stock market. I feel there is no better investment than real estate: you get monthly passive income and long-term growth for retirement (as investment rather than primary residence).

Why is it NOT better to rent?

• You have no control over when and how much your rent will be raised.
• You will get no return on your investment of rent. No equity in the home. No interest income.
• When you move, you will have to pay new deposits and moving costs. And you aren't in control of when you move-the landlord may end the lease.
• You can't remodel to your liking or make it your place.

When is it better to BUY?

• Do you want more space and freedom to make the space yours? By owning your home, you can paint, change flooring, even knock out walls or add rooms in. You can change the exterior too by adding a garden, shed or fence.
• You are prepared to maintain the repairs of the home as well as the taxes and insurance. Normally, the last two are in your monthly payment, but you will need to set aside funds to make sure you are able to make repairs when issues arise.
• You understand homeownership is the key to building wealth, not only for you but your entire family and heirs. Each month you make a payment, you're building equity in your home. This can then be used to buy another home, make improvements to the home, or pass on to your heirs.
• You understand a home is an investment that generally appreciates in value. There are some types of homes which do not and lose value as they age like a car.
• You have pride, feel responsibility and commitment and want to set down roots in your home. Most people have emotional ties to their homes as they make memories and have done much to it, to make it their own.

Why is it NOT better to buy?

• Will the value of your home rise? It is never a guarantee your home will appreciate, but due to inflation it is likely. If you buy your home in the peak of the market, it is possible you will lose money. Consider this question when you buy a home: Will I be ok if in 10 years I sell this house for the same I bought it at?
• Homeowners tend to accumulate belongings! It can make it harder to move in the future, so if you move often, it may be better for you to rent.
• Homeowners can deduct the mortgage interest they pay. If you don't itemize deductions, you won't be able to take advantage of this on your federal income taxes. If you have state taxes, the standard deduction is usually much lower, and you will be more likely to be able to deduct the mortgage interest off your state income taxes.
• You are not prepared to cover the cost of home maintenance, taxes, insurance, nor capital improvements.

Depending on your life stage, savings and debt, you may be ready to buy! Check out the calculator link above or contact me about more information for your decision on whether to rent or buy!