To Rent or Buy?
That Is The Question!
Purchasing a home is one of the biggest financial commitments you may ever make, but it may not be the right move in every situation. Many renters dream of home ownership and building equity over time, but it's a decision that involves careful consideration.
As a Realtor that works with many first time buyers, I always ask these questions:
1. Are you truly in a financial position to buy? If buying overstretches your finances, you may be less able to handle an emergency if it arises or save for retirement.
So how do you find this out? Start the conversation with a mortgage lender now! They will look at your financial picture and design a roadmap to home ownership, even if that goal is a year or two away. Maybe you need to pay down debt, or improve your credit score -a lender will guide you through this process and set a budget that works for you, on your timeline. A lender will also explore any loan programs or grants you may qualify for to assist with costs associated with your purchase, you may need far less up front than you think!
2. Are you planning on staying in your home for a few years? One of the goals of homeownership is to build equity, and to provide you with a valuable asset when it comes time to sell.
So how long should you plan to stay in your home? Ideally 3 or more years is best, allowing for your home to appreciate in value and for you to be able to recoup the one time costs associated with buying such as broker fees, title insurance and mortgage origination fees.
3. What does your heart tell you about renting versus buying? Buying a home isn’t just a financial decision, it’s an emotional one. You need to be ready for the added responsibility, but there is something about calling a place “yours” that renting doesn’t offer. If you’re looking to put down more permanent roots, buying may be the right step.
So when will I know it’s time to buy? Some people decide by gut instinct, others through detailed analysis and research. If your rent is due to increase, it may be time to examine whether your estimated monthly mortgage would be the same or less than your new rent, putting you in a favorable position to buy. Consult with a local Realtor who will give you insight into the current market - does it favor buyers or sellers? Are they seeing price reductions and seller concessions offered? What are the average days on market for properties in your area?
Ultimately the question of renting versus buying comes down to financial as well as lifestyle considerations, and it’s a decision you want to feel good about years down the line.
