Rent or Buy? Today’s Economy makes the Decision Trickier
There are many factors to take into account when trying to decide if it is better to rent or buy in the current economy. We all saw the major hit that the housing market took a few years ago, but it now seems as if it is starting to make a rebound. There are two main considerations to look at when exploring which is the better option for you-- the financial aspect, and the personal/emotional aspect of your decision.
Emotions and Lifestyle
While financial considerations are the biggest factors when making the decision about where you will live, your personal and emotional concerns will also play a role in deciding as well. When renting a home you typically cannot do things such as adding new fixtures like lights, cabinets, or vanities without permission from your property owner, or adding landscaping and fencing.
Aside from the permission issue, anything that you affix to the property becomes part of the property when you leave it, by law. Some property owners do not even allow tenants to change the color of paint in the home or hang pictures on the walls. If personalization is something that is important to you, renting may not be the option you will want.
Another important thing to consider is having a pet. Some people who rent property forbid any pets to occupy the residence, which significantly lowers the number of available rental units for animal lovers.
Finances are likely the biggest part of the decision making process between renting and owning. When renting, you generally will only need the first month’s rent and a similar amount for a security damage deposit before moving in to the home.
Purchasing a home today is typically much more difficult than in past years. Credit standards are much higher, and banks and other lenders require down payments that are more significant. Barring special government programs, typical down payments in the neighborhood of 20% of the purchase price are required. Added to that, you will need roughly another 5% for closing costs when you sign the paperwork for your home.
Another thing to look into is whether you could rent the home cheaper than what you will pay for your total monthly payment. This has become much more common, with the foreclosure crisis and number of vacant homes. Many people who are unable to sell their house in the current climate will rent it instead, thereby driving the prices for all houses down in the process.
Additional costs when you own a home-- for taxes, insurance, maintenance, repairs, and landscaping are part of the equation as well. If your roof leaks, or your shower breaks, you will have to repair it yourself or contract someone to do it for you. Renters can call their landlord to make repairs.
There are definite benefits to owning a home—you are building equity as you make your payments and you get great tax breaks on your mortgage interest. Certainly there are great bargains to be had in the purchase market today, meaning your equity should grow substantially as the housing market gradually climbs back to normal.
Overall, the decision to purchase or rent is a personal one. Some people just want the home to be theirs, with no one to tell them what to do. Others buy a home to “cash it in” at retirement time and find simpler lodging.
No matter what you decide, you should be prepared to do extensive research on the housing market in the area you have chosen, as well check out mortgage rates and payments at a comparison site like www.tomorrowfinance.com.au
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