W.W.Y.D.: RENT OR BUY?

Are you on the fence about whether to rent or to buy? You just need a wee bit of emotional readiness to choose a home with your style in a location that meets your lifestyle needs. For home buyers, the challenge is building a good credit history and saving for the deposit. For renters, the challenge is in paying monthly payments to something you will not own in the end. So below are three questions to help you decide if you want to buy.

courtesy of www,dreamstime.com                                     

 What is driving you to want to buy?

•  The cost of renting is growing more and more expensive.

•  Need more independence and space from parents or roommates.

•  Looking for a wealth building tool to pass down to your family.

•  Want to customize a home to your personal preferences and lifestyle.

       How does your finances measure up?

• Utilities and parking are not always included with home owner association fees and therefore it becomes an additional expense. But renters can find most times that the utilities are included with the rent payments. Other expenses for home owners are hazard insurance, co-op/home owner association fees, property taxes, and sometimes private mortgage insurance.

• Most mortgage lenders require your loan to carry a monthly payment lesser or equal to 36% of your net monthly income. Use calculators like ones on Bank Rate to determine how much you can afford. 

• Just like rent applications require a security deposit, home purchases require 3.5 to 20% of the total purchase price in earnest money to show how serious the buyer is for the investment.

 How much freedom do you require?

• If you own the home, you are given more freedom to build, reconstruct, and redesign but there are some home owner associations that restrict renovations.
• There is a return on the investment in the form of equity as the home appreciates for home buyers.
• If you buy your home, you may be able to receive a more direct benefit from renting the entire home or a room as an additional source of income.
• Buying a home is a long term commitment since most mortgages are 15-35 years for a payoff. Also, if you choose to sell the home it can take months or years depending the property and its location.

	BUY	RENT
Credit history plays a major role in payments	X
Receive a return on the investment	X
Consequences for 3 missed payments	X	X
Freedom to renovate freely	X
Home maintenance and upkeep needed	X	X
Avoid scammers that seek vulnerable people	X	X
Requires emotional readiness	X
Long term commitment	X
Pay property taxes	X
Property insurance encouraged	X	X
Tax benefits are available	X
Require a form of earnest money or deposit	X	X

Home is where you make it so there is no right or wrong answer, just a search for the best answer for you. If you still need to decide, take your time and keep researching sites like realtor.com. If you made your decision keep following us for ways to grow financially to continue to be at peace with that decision. Catch our next blog on February 30th about the steps in the home buying process! Feel free to leave comments on this post or social media on instagram @practicalwallet,, twitter @practicalwallet,  and pinterest @practicalwallet.

  

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