When renting or buying a home, there’s no conclusive answer about the better option. Though homeownership is often seen as a hallmark of the American dream, renting can be just as fulfilling depending on your financial goals, priorities, and lifestyle. Keep reading to determine which choice is best for you.
When deciding to buy a home, the most important question is if you are financially ready. Before you decide whether to rent or buy, look over your financial history and current situation with a professional. Taking an honest look at your finances can help determine whether you have an adequate income to pay for all the necessary expenses with home ownership and if you have sufficient emergency funds in the event something goes awry. On top of analyzing your income and savings, be sure to examine your credit report and score, as these numbers will directly affect the mortgage and interest rates you will be paying on your home.
Suppose you’ve crunched the numbers and ultimately determined you aren’t in a financial position to purchase a home; decide whether it’s in your best interest to continue renting and assess what economic changes need to be made to reach this milestone. For example, downsizing your current house or making lifestyle changes concerning your expenses could help. Additionally, if your credit score isn’t where you’d like it to be, consider improving it through smaller investments before closing in on a home purchase.
Unlike renting, where money is consistently lost on rent payments, a great “pro” associated with home ownership is the investment of owning a property that increases in value depending on the market and property you choose to buy. Owning a home also gives you the complete freedom to do what you want with your property, whether it be knocking down walls to create your dream floor plan, remodeling your kitchen, or digging out an in-ground swimming pool.
However, despite the many freedoms and perks that come with home ownership, there are significant cons that may lead you to rent. Notably, owning a home comes with maintenance costs and property taxes that often amount to a pretty penny. When you rent a house, you are usually only expected to pay the rent, whereas buying a home entails the responsibility of property tax and maintenance fees like landscaping, plumbing, heating, and cooling services. Thus, determine whether your current budget leaves ample room for expected maintenance costs if you are leaning towards purchasing. Additionally, owning a home is a more significant commitment than renting, so if you ever wish to move, brace yourself for the lengthy process of selling your home.
Check out our previous blog post on Simple Ways to Improve Your Financial Literacy. In addition, if you need personalized financial advice, our team is always here to help—contact us today to book an appointment!