Should you rent or buy a home? Many people are considering buying a home – and for a good reason! There are many advantages to buying a home: enjoy more space, build equity, and decorate and paint the walls however you like without asking a landlord. But, there are advantages to renting – especially if you are considering moving soon and don’t want to handle any of the maintenance or repairs that come with homeownership.
So, how do you determine if you should buy or rent? It all depends on your financial goals.
Is Renting Or Buying A House Right For You?
It’s no secret that it is much more expensive to buy a home than to pay rent every month, so it might seem like renting is the more affordable option, right? Not necessarily.
There are steeper upfront costs associated with buying a home, but significant financial benefits and lifestyle perks offer value and offset the initial costs. JVM’s affordability calculator is a great starting point to figure out your homebuying budget. This article will also cover the true costs of homebuying and renter and how they impact your budget.
Cost Comparison Of Renting And Buying
When it comes to comparing the costs of renting and buying, it is helpful to think about the portion of your income that goes towards your housing expenses monthly rather than the total cost of a home. Buying a home can be hundreds of thousands of dollars upfront, but the monthly cost of owning a home depends largely on your loan amount, interest rate, loan type, and other factors.
When you buy a home with a mortgage, lenders will review your financial history to determine your mortgage qualification. Lenders will examine your credit score, debt-to-income ratio (DTI), and your desired loan type to determine the interest rate you qualify for and your loan amount.
The best way to find out what homebuying and mortgage options are available to you is to get pre-approved with a trusted mortgage lender. A pre-approval can focus your property search and budget. Pre-approvals determine what you can afford and what budget you are comfortable spending on a monthly housing payment.
Reasons To Rent
Spend Less Money Upfront
If your goal is to spend less money upfront and prioritize your short-term savings, then renting may be the best option for your finances. Buying a home has many upfront costs that can add up quickly; if you plan to buy a home, you will need to be prepared to pay for a down payment, closing costs, insurance, and property taxes. One of the biggest upfront costs homebuyers face is their down payment. Many people mistakenly believe that they must put 20% of the purchase price down. But, homebuyers can purchase a home with as little as 3% down, depending on the loan type.
Keep in mind, though, that the size of your down payment will impact your monthly payment – larger down payments typically result in lower monthly payments. If a lack of funds for the upfront costs of buying a home is your biggest concern, then renting might be the best choice for you as you continue to save for your homebuying plan.
Upkeep & Management
In addition to monthly mortgage payments, homeowners are also responsible for all the home maintenance and repairs of their property. When you own a home, you can’t call a landlord to fix a broken pipe. All repairs and maintenance costs fall on the homeowner. If convenience is important to you and you’re dreading the thought of managing the upkeep of a home on your own, then renting might be for you. JVM Lending offers clients a JVM Homeownership Advantage program with benefits that go beyond mortgages – including home maintenance services. Our home concierge service makes it easy to take care of all your home project needs and simplifies the process for tracking and planning any home repairs.
One of the perks renters enjoy is flexibility and mobility to pick up and move. If you don’t see yourself in one place for very long, renting is likely a better option. Even though you own a home, you are not tied to one property for the rest of your life. Most homeowners keep their mortgage on average for six to ten years before either refinancing or moving. With that in mind, it’s not unrealistic to plan on buying a home to live in for a few years and then selling it for a profit later to pursue an opportunity and move to a new city or state. According to Zillow, home values in the U.S. increased an average of almost 15% over the last 12 months in 2021. Wisely investing in real estate can make moving to a new city or state even easier on your budget.
Reasons To Buy
Stable Housing Costs
Rental prices are rising across the nation. One of the disadvantages of renting is that you face rising, unpredictable expenses every year. When you buy, your mortgage payments remain at a consistent and fixed cost year to year. According to Apartment List, rental prices spiked a staggering 9.2% over the last six months in July 2021. For many people, the stable housing costs of owning are much preferable to potential rate hikes.
Build More Wealth
Many long-term financial benefits come with buying a home. Building equity is one of the biggest boons homeowners enjoy. Renters are unable to build wealth as every payment they make goes straight into their landlord’s pocket. Equity is the appraised value of your home minus your mortgage balance. As you pay down your mortgage each month, you start to build your equity in your home. People love to buy because they get to invest in themselves and fund a huge financial asset that is all their own – their home.
Grow Your Family
Many people who are planning to grow their family see buying as an excellent option. Whether you’re planning to have children or move your parents in with you, having an ample space that you own can be a great way to meet your family’s needs.
Owning a home gives you the chance to connect with a community and put down roots. It also gives you access to premier school districts, public parks, and much else. Unfortunately, those perks do come at a price: property taxes. Property taxes can vary based on your city and state and are typically a recurring cost that homeowners will need to pay each year they remain in the property. We advise that all homeowners check with their mortgage lender about their home’s property taxes and how they will impact their monthly payment and housing budget.
Are You Ready To Buy?
If you are planning to buy a home, contact our team! Our Client Advisors are experts in the mortgage and homebuying process and are available to assist you seven days a week by phone at 855-855-4491 or email at [email protected]. If you have any questions about whether renting or buying is the right financial decision for you, please reach out to our team!