Should You Buy or Rent a Home?
The decision to buy a home can be a big one at any stage in life. From recently graduated Millennials to Generation Xers who may be relocating for a job or Baby Boomers looking to retire, the choice to buy or rent is different for everyone. In many cases, buying tends to be cheaper than renting a property, but taking the plunge into homeownership will ultimately come down to your finances and personal life.
What two basic questions should you ask when deciding whether to buy or rent a home?
1. Are You Looking to Stay Short- or Long-Term?
When you plan to stay in a home for more than five years, it’s worth the investment to buy rather than rent. Even if you put up for-sale signs shortly after your five-year anniversary, you’ll have built up equity during that period. Equity is the amount of your home that you own and helps increase your return when it comes time to sell.
On the other hand, if you feel unstable in your career and may experience relocation or job loss in the near future, renting may be the better option.
- Can You Afford the Costs of Homeownership?
Experts recommend that homebuyers save 20 percent of the purchase price for a down payment, although you can get a mortgage with as little as three percent down. However, when you put down less than 20 percent, you must pay private Mortgage Insurance to guarantee that the lender receives at least a 20 percent down payment , which is more disadvantageous in the long run. If you’re unable to save 20 percent, plus the other costs many first-time homebuyers don’t expect, it may be more beneficial for to you to rent. These additional costs include:
- Closing Costs
- Attorney Fees
- Closing Fee
- Loan Origination Fee
- Property Inspections
- Real Estate Commissions
- Survey Fee
- Title Insurance
- Underwriting Fee
- Property Tax
- Property Insurance
It is also suggested that you save one percent each month to put toward unexpected maintenance costs. When there is an issue with the HVAC system or a bug infestation, you become responsible for the cost, rather than your landlord when you rent.
At the end of the day, whether you choose to buy or rent a home comes down to your personal situation at the time. Although owning a home allows for more flexibility than renting, homeowners have more responsibilities than renters. To help determine the best decision for you, contact the mortgage professionals at Ion Bank today!
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