Growing up, we lived in a rental townhouse. It was nice, in a great location, and was bigger than some of my friends’ homes. But it was a rental, and there were times when I longed to have a home that belonged to us. Since I was a child, the choice to rent or buy wasn’t mine, but after I graduated from college and got married, I finally did face that decision.
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Image by Steve Snodgrass
Over the years, I’ve rented and I’ve bought and just like anyone making the choice between the two, I had many things to think about.
1. Length of Stay
One of the main factors in deciding whether to rent or buy a home is how long you’ll likely be staying there. If you’re going to be in the home for under five years, there’s really no point in buying. You’ll hardly have an equity built up in your home by the time you leave, and if the housing market tanks, you could lose money.
When my husband was in graduate school, we knew we were only going to be in that town two or three years, so we never even thought about buying a home. We happily rented a cute apartment and when it was time to move, it was no problem. Another challenge of owning a home is that moving isn’t as easy as if you are renting. When you rent, you are much more flexible in your ability to leave.
2. Lifestyle
Another huge factor in choosing between renting and buying is your lifestyle. If you’re young and single and spend most of your time working and going out with friends, you probably don’t want the added responsibility of owning a home. By renting, you can have a nice, stylish home without having to worry about things like yard work, upkeep and maintenance. And you will have the ability to move quickly and easily if your job changes or you simply decide you want to live somewhere else.
But if you are older and have a family, you may want the stability and investment in the future that a home represents. You may want to spend time taking care of something and making it just what you want in a home. You may decide to buy a home because you know you’ll be in the same place for many years and want to have something to show for your monthly payments.
3. Location
There’s a saying in the real estate industry, “Location, location, location,” which means location is huge when it comes to choosing a home. When it comes to deciding whether to rent or buy, location is also important. In some housing markets, the prices are so high it’s almost impossible for anyone to afford to buy a home, while in other locations, houses are so cheap it hardly makes sense to rent.
Get to know the area in which you are looking for a home and compare rental prices to home prices and how much a monthly mortgage payment would be. Don’t forget to compare home insurance as well and find out what your premiums might be for similar properties in different locations.
Finances
It may seem obvious, but sometimes the decision of whether to rent or buy a home comes down to money. Although house prices have come down and there are many financing options available, generally you need a little bit more money to buy a home than to rent.
To start, you almost always need some money for a down payment, and this can be several thousand dollars. This alone is a hindrance to many. To rent, you may need a deposit of around $500, but to buy you may need $10,000 or more. Usually, a monthly mortgage payment is more than rent, but that’s not always the case.
And when you rent, you don’t have to worry about paying for maintenance and upkeep of the home. Renters typically only need home contents insurance, as the landlord is responsible for the building. Since we bought our home five years ago, we’ve had to put on a new room and have new duct work installed. Both were expensive and had I been in a rental, I wouldn’t have had to pay for those repairs.
There are many things to consider when you’re deciding whether to rent or purchase your next home. Remember to take time and really think about what you do, keeping in mind that your main goal is to find a home that best meets your needs, whatever the situation.