There are many reasons why you may have decided to purchase a home – a growing family that needs more space, you’re tired of paying rent and want to invest your money and you’d like to get the tax breaks that homeowners enjoy. Those are just a few.
Don’t simply compare what you’re paying in rent to what you’d be paying with a low interest mortgage payment. Even though it can be an asset for the future, you may not be ready financially to make the commitment.
Should you rent or buy a house? Here are factors you might want to consider before deciding
The pros in homeownership highly recommend that you have a down payment of at least 10 to 20 percent and have an emergency fund socked away that can get you through 3 to 6 months of bill payments.
There are also other points to consider when deciding whether to rent or buy. Buying a home is touted as ‘smart’ and renting as ‘dumb’ but that’s not always the case. Purchasing a home can be a good decision, but some experts believe that it’s a bad financial decision and that the idea of home ownership is overrated.
Stability and Freedom
Purchasing a home provides security because you would never be evicted by a landlord. Renters have little say over how long they can stay in a rented home after the lease period ends. Living in your own home also gives you the opportunity to renovate and decorate it as you see fit.
When you own a residence, you have control over who has access to it. In comparison to renting a property, the landlord can simply notify you that they will be dropping by on a regular basis to conduct regular checks and ensure you are taking care of the house.
Property Value and Taxes
Some things to consider when deciding whether to rent or buy include the fact that when you pay off your mortgage the home belongs to you. If your home has appreciated more than the taxes, mortgage and interest you’ve paid in – you’ve earned a return or simply break even.
Keep in mind that owning a home also qualifies you for tax incentives that can offset some of the costs. But even though you may own your house outright, you’ll still pay a significant amount of taxes and interest.
Other Things to Consider
You should also realize that renting isn’t exactly “throwing your money away.” You get a place to live and you don’t have to pay for issues such as repairs and maintenance. So, rather than make a decision on what the headlines are saying about home ownership being the best route, you should consider your current situation.
Figure it out by researching the pros and cons of homeownership, crunching numbers and taking a long, hard look at your finances and lifestyle. You may be moving from place to place in your career and don’t need the hassle of putting your house on the market every year or so.
Consider the cost of housing in your area. Houses may be too expensive for your pocketbook right now, so it could be better to rent. But renting may also be expensive and owning a home might be the better option.