Trying to decide between renting or buying? It's a choice that needs thoughtful consideration.
When looking for a place to live, what's most beneficial for you? There are many factors to consider, including cost and commitment.
We've organized some information to help you weigh the pros and cons of each option. In the end, your personal lifestyle and finances will help you determine what's the best fit for you.
Ask yourself five questions when considering to rent or buy, suggests Bankrate:
Across the country, only 45 percent of renters (on average ) can afford the payments on a median-priced home in their area, according to Harvard University's Joint Center for Housing Studies, reports MarketWatch.
When renting a home, there's not as big of a financial risk involved as when you buy. The main finances to consider are straightforward:
When buying a home, there's much more to look at. First, speak to a reputable lender to weigh the risks and possibilities. They'll be able to assess your financial situation, and will let you know what loan options are available to you.
Not only will you be responsible for a monthly mortgage payment, but there are many other costs, too. You'll want to get an inspection. That could run anywhere from $300-$700, depending on what's needed, reports the Lenders Network.
Next, you'll have to pay for an appraisal. That costs around $500. You'll also need money for a down payment, reports Nerdwallet. Are you prepared with a sizeable down payment? At the very least, a minimum of 3 percent of the home's price is expected, according to Bankrate. Some lenders like 20 percent for down payments. That's $60,000 on a $300,000 home. But this amount will depend on what loans you qualify for. You need a 3.5 percent down payment for FHA in most cases, reports the Lenders Network.
Another key point to check: Is the property within a homeowner's association? If there's an HOA, you'll need to factor in monthly dues. These typically cover services like property upgrades, landscaping, exterior maintenance and community amenities. And if you pay less than 20 percent for your down payment, you'll most likely have mortgage insurance included in your monthly payment.
On top of all of that, you'll have closing costs from the lender and closing attorney. Also factor in home insurance, title insurance and property taxes.
Buying a home is one of the biggest purchases you'll ever make. Be ready for a lot of dollars to protect your investment. Comparing monthly rental payments to monthly mortgage payments is not accurate. That's because there are many more costs that go into homeownership.
When renting, you don't have to worry about major home maintenance. The owner of the property would be responsible for repairing any issues with major systems, electrical issues, plumbing issues and general upkeep of the home.
If any unexpected occurrences happen, such as a tree falling on the home, you wouldn't be responsible for handling repairs. These things can take a lot of stress and energy off your plate if you don't have the time or means to handle it.
If you buy a home, you would be responsible for all repairs. Homeownership usually involves a running list of repairs and upgrades. Things that you may not care about in a rental, will become more important when you own the property.
In your apartment search, you may discover you can't afford to purchase in the areas you want to live in. Renting gives you the opportunity to live wherever you like.
Consider your future plans. Are you between jobs or thinking about moving to a different city? Then, a more flexible living situation might work best. If you're moving to a new city, you should familiarize yourself with the community before settling on an area.
If you think you would be living in the property for less than five years, it may not be financially sensible to own. You have to live in the property for at least two years to avoid paying capital gains on a sale, advises Nerdwallet.
The decision about whether to rent or buy is a big one. And, the market is ever-changing. There's no way to know what the value of the property may be when you want to sell a home you own.
If you plan on living there for a while, it could be a great investment. But if you're staying less than five years, it may not be as beneficial to you. You might end up putting more money into the property for necessary repairs or improvements than you get back. That's the dilemma at hand. Once again, ask yourself, would renting make more sense?