The decision to rent or buy a home is likely one of the biggest financial decisions that you will ever make in life. Because the costs of buy vs. renting Real Estate can vary, it can be quite difficult to tell which offers the better deal for your budget, goals and return on investment (ROI).
To help you with answering this question, we have put together a guide of the most important factors to consider.
How Many Years Do You Plan To Remain in Your Home?
If you are only planning a short stay, renting is usually recommended as the most suitable option for your needs. Buying tends to benefit you the longer you stay in your home because the upfront costs of buying are then spread out over many years. If you want to buy, plan to remain in your home for a minimum of 5 years. Otherwise, you might take a financial hit. You have to keep in mind real estate closing costs. Every time you go through closing, buying and selling you have to pay the associated costs which can sometimes add up to a couple of thousands of dollars and limiting this expense is always a good idea to keep in mind.
FYI: The way mortgages are structured, you pay a lot more interest in the first few years that you own a house. Once you are about five years into paying down your mortgage, you will have made enough progress on the principal to make it a better deal than paying rent each month.
How Will The Market Change In The Future?
The home and rental prices for local real estate markets change frequently. Unfortunately, how prices will trend in the future is one of the most difficult things to predict. If you choose to rent a home, consider the fact that market prices may not always remain cheap enough to make renting a worthwhile investment versus owning.
Now may be a better time to buy a home before home prices go up, and rent becomes more expensive. Alternatively, you may find that home prices have lowered in the future.
Don’t Forget About Taxes!
The property taxes and mortgage interest costs that you pay when you buy a home are significant. However, they are also deductible. This deduction is only available to homeowners and not renters and can save you a lot of money on your taxes.
How Does The Recurring Costs Stack Up?
Owning your home comes with many expenses that renters are typically not required to pay. As a result, you should factor in the additional costs of maintenance, renovation costs, homeowner’s insurance and community living fees.
These are all expenses that you will be required to pay on a monthly basis. As a renter, any maintenance concerns will be covered by your monthly rent. In some cases, people who choose to buy homes are buying in order to maximize their investments.
If you would like us to help you estimate the costs of the purchase of a home so that you can determine which option is best for you, get in touch with us today at (805) 212-1058 or send us an email at firstname.lastname@example.org to schedule your free consultation. We look forward to helping you find the perfect home whether it is renting or buying.