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Deciding Whether To Buy Or Rent Your Next Home
Whether to rent or to buy the home in which you live is a major decision that should not be taken lightly. Your decision doesn’t just affect how much money you have left at the end of the month; it also affects your lifestyle and the size of the savings you accumulate over the years.
Every day, despite the added expense and responsibilities, people make the choice to buy a home because they see it as an investment and a more permanent place in which to raise children, even though financially they’d be better off renting. Similarly, people often rent for the flexibility and minimal responsibility it offers, even though they’d amass a larger net worth over time if they bought a home.
So many factors, in addition to finances, need to be considered before choosing whether to rent or buy. Housing markets and life circumstances (and lifestyles) are too varied to believe the old adage, “Renting is throwing away money…” or “It makes more sense to buy if your monthly mortgage payment is the same as your monthly rent.”
Realtor.com provides a handy calculator to compare your options of buying vs. renting. In addition, the table below lists some of the issues to consider, and the pros and cons of each. If you’re still not decided after considering these issues, check out the "Additional Important Questions to Consider" at the end of this article.
|Personalizing your own place has its perks.||Pet ownership is another consideration.|
|Consider how flexible you want to be.||Initial costs may prohibit purchasing a home.|
|Financial commitments must be considered...||...both big and small.|
|Home ownership is one of the biggest decisions you'll make.||There a lots of pros and cons.|
|As long as you have a fixed-rate, your monthly mortgage stays the same.||Are you prepared to commit time to the upkeep of a house?|
|Are community amenities important? Can you afford to put in your own pool?||Owning a home means you're stuck with your neighbors ... good or bad.|
|Additional Important Questions to Consider:|
1. How long do you intend to live there? While most people consider the financial investment required when purchasing a home, you must also consider the time that must be invested and the added responsibilities as well. If you are considering buying a home, be prepared to stay in it for 5 to 7 years or longer in order to recoup the cost of buying and to build equity. If you can't make that long-term commitment, you're probably not ready for the responsibility of home ownership.
2. Consider your goals for the future - both for your career and for your personal life. Here are some scenarios that may ring true for you:
3. Do you have the ability to finance a home purchase? If you’re considering buying a home, your first step should be to meet with a lender to determine whether you qualify for a mortgage and, if so, how much you can borrow. Your ability to qualify depends on several major factors:
If you fall short on any of the above criteria, you may be better off renting until you can improve your credit score and/or save more money.
Robert is the co-founder and Broker at PAX Real Estate in Prince Frederick, Maryland. He brings with him over 30 years experience building successful companies as an entrepreneur and business owner. W....