Renting vs Buying: How to know which is the better option?
With rent high in many parts of the country, young professionals and families might be wondering if they should keep renting or look for a home. Here are some tips to guide you in the right direction.
Rent when you need flexibility, have a limited income, or want to avoid maintenance costs.
Flexibility: If you aren’t sure what your plans are over the next six months or two years, you might want to lean toward renting.
Income: If you have a limited income, or you’re planning to change jobs, renting is the better option. Since leases usually only last a year, you’re able to figure out your plans while still having a roof over your head.
Maintenance costs: If you don’t want to pay for repairs, consider renting. A landlord will need to pay for almost anything that goes wrong in your rental, alleviating this pressure off of you and your wallet.
Buy when you’ll be in a community for a longer period of time, when you can afford a large down payment, or you want to invest your income into property.
Settled: If you know that you’re going to be in the same place for at least five years, then you should consider buying. Doing this will help you settle down, which is helpful for young families.
Large down payment: First, look for a home that is ideally two and half times your annual income. Then, plan to have a down payment of about 20 percent saved up for a down payment. You may discover that your monthly mortgage payments are lower than rent payments.
Invest: Buying a home is an investment that can help you build equity with your assets. Instead of spending your paychecks on extra wants, invest your income in property that will provide a payoff if you decide to sell in the future.
When deciding whether to buy or rent, consider your current financial and living situations to determine which is the better option for you.