Many renters, especially young couples planning to settle down and start a family, debate whether to keep renting an apartment or buy a home. Depending on your financial situation and long-term goals, though, one option may be better than the other. To determine if it’s the right time for you to start searching for a house, consider the following:
Some renters think they’re throwing away money on rent. It’s true that you might be able to find a monthly mortgage payment that is similar to, or even lower than, your current rent; however, be careful not to overlook the additional costs of homeownership.
As a homebuyer, you’ll need to save up thousands of dollars for a down payment and closing costs. After the purchase, you’ll also need to budget for the mortgage, insurance, property taxes and maintenance, among other expenses. As a renter, you might need to pay for renters insurance, but all taxes, maintenance and repair costs are on the landlord.
That said, if you can afford the extra costs of homeownership, there are financial benefits to buying a house. Chief among them, of course, is a home’s ability to appreciate over time. Homeowners can also take advantage of tax deductions that might help with overall costs.
One major impact on whether it makes sense to rent or buy is how long you plan on staying in the property. Rentals make the most sense for short-term stays. Unless you intend to live in a home you buy for at least a few years, the house likely wouldn’t appreciate, and you’d be selling it either at a loss or with little return on investment.
Conversely, a long-term stay in a home could allow you to not only cover the initial costs of purchasing, but also build up valuable equity. That profit isn’t guaranteed, though. Various factors, including market fluctuations, can affect a home’s worth.
Let’s say you’re in love with a certain town or city, or you want to live close to family. If the homes in that area are too expensive for your budget, renting might be best. If you’re still determined to own, consider looking for a house in a nearby area with lower sale prices. A real estate agent can help you weigh your options.
Renting and owning both offer their own distinct freedoms.
As mentioned, renting is great for short-term stays, as it allows you to pack up and move almost whenever you want with little to no financial repercussions. (You could be penalized for breaking your lease early.) You also don’t have to worry about handling maintenance as a renter, but the landlord controls what’s allowed on the property.
As a homeowner, you have much less flexibility to move around, but you can renovate or decorate your house however you like without having to ask a landlord for permission. Unlike with many rentals, you can also have pets. Some buyers find such newfound independence and authority, alone, worth the price of homeownership.
When deciding between renting or buying, consider what you can afford and how you’d like to live. If renting is the best option, you can stay in your current apartment or start looking for a new one. If homeownership sounds best, it might be time to ready your down payment and scope out the market.