Of all milestones associated with early adulthood, few are bigger than making the transition from renter to homeowner. While this rite of passage is a common goal, individual circumstances can differ and there are many contributing factors that must be weighed into the decision. Here are five of the most important things to be mindful of.
Planning For the Future
Let’s not ignore the long-range benefits of homeownership. While values can vary from state to state, renting is not an investment, even if it seems cheaper. Equity is something intrinsically tied to buying a home. In a stable housing market, equity accrues as the homeowner pays off the mortgage, thus increasing the overall property value.
Buying Adds Up
Your monthly rent check covers your housing fee in its entirety. If there are other expenses, like utilities, those pale in comparison to the extra costs of owning a home. In addition to factoring in the principal and interest when determining your monthly balance, mortgage payments are also comprised of property taxes and insurance. Having a strong credit history, no debt, and multiple cards goes a long way towards obtaining an optimal mortgage rate.
While renting lacks the security of homeownership, it does allow the flexibility to maintain a more mobile lifestyle. For those seeking the freedom to change jobs or move easily, renting can be a convenient option. Alternatively, the stability of homeownership could be a more suitable option for those planning on establishing deep roots. Always consider your lifestyle when assessing whether buying or renting is right for you.
When something goes wrong in the kitchen or bathroom in your rental apartment, it’s the landlord’s responsibility to fix the problem. General maintenance is an obligation inherent in homeownership. But the investment that goes into these repairs can benefit you in the long run. Adding value to a rental unit may improve your quality of life, but your financial investment only benefits the property owner.
Rent or Buy?
Based on overall statistics, buying a home can be more affordable than renting. Nationally, homeownership is 35% cheaper than renting. However, after examining different regions, the picture changes slightly—often because many markets include homeowners’ association (HOA) fees. Natural disasters like hurricanes, forest fires and earthquakes can impact insurance rates as well as regular property maintenance. These additional expenses can make renting preferable in certain situations.
Since figuring out the cost of renting or buying is a complicated undertaking, some websites use up-to-date national reports in order to calculate for you.Trulia’s Rent vs. Buy Report provides a helpful and extensive look at the pros and cons of each option.
Buying a home is a huge step. Are you contemplating taking the plunge into homeownership? Share your stories or any lessons learned in the comments below.