In this special episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard…
To rent or to buy, that is the question! Even after so many years, this topic is still heavily debated. People often firmly stand on one side of the argument, but the truth is, there isn’t one answer for everyone. Renting instead of buying isn’t always the wrong answer, despite the common belief that it’s the same as throwing money away. By the same token, buying might be a good option if your situation is right. So, to answer this question, we need to examine situations where you’d be best suited to rent or to buy!
When should I rent?
Yes, there are times when renting instead of buying is worth it, and is even the best option for you! Here are some times when renting is likely the best move.
You need flexibility
Renting offers much more flexibility than buying in terms of moving. If you aren’t sure whether you plan to stay in the area long-term, or you aren’t sure what kind of house you want to buy, renting is a good option. When you rent, you’re able to safely exit your contract and move at the end of the term without any penalties. Usually, rent agreements last for one year. This means you have an annual chance to reevaluate your situation. Whether you decide you don’t like the area, or the rent is too high, or you need a change in size, there’s no penalty for leaving your rental unit once the contract is up. This can save you a lot more money than if you buy a home, then need to break your mortgage terms two years later. You’ll save on penalties for breaking your mortgage, plus you’ll avoid the down payment and closing costs.
Another great thing about renting is the lack of maintenance and upkeep you’re responsible for. Of course, you can’t trash an apartment unit and expect to not pay for it. However, you’re not responsible for maintaining things like heating and air conditioning units, as long as you weren’t the cause of damage to them. It can be nice not to worry about this much upkeep, and if you’re not ready to maintain a home, renting is likely the best option for you. Whether it’s financial reasons or personal preference that keeps you from wanting to handle home maintenance, renting takes this job away from you.
It’s the best move for your finances
Sometimes, renting instead of buying is the best option for your budget, and that’s totally fine. Renting comes with no down payment, no closing costs, and no property taxes. This takes away a ton of money you’d need to save to buy a home, and with housing prices on the rise, it just might not be in your budget to do so right now. Even though renting has its costs and doesn’t come with any ownership benefits, in the short-term, it’s definitely cheaper.
When should I buy?
Now that we’ve gone over when renting instead of buying is the best choice, let’s review when buying is a good option. Just like with renting, there are plenty of circumstances where buying is best for you.
You’re ready to start building equity
Home prices are consistently increasing and properties are becoming more valuable. By buying and owning a home, you can start building equity. Owning something as valuable as a home can benefit you in the long run in case you decide to sell or refinance in the future. Home equity can also help you buy a new home, or retire more comfortably.
You want to settle in a certain area
If you know the area you want to live in, and you know exactly what kind of property you’re looking for, buying could be a good move. As we mentioned earlier, it’s tricky to move after buying a home, because of potential penalties for breaking your mortgage. If you’re sure about where you’re ready to settle, and you plan to stay long-term, buying might be a good move for you. If you don’t require the flexibility of renting, there’s less reason to choose to rent in this regard.
You can afford it!
Of course, you should never buy a home if you can’t afford it. Affording a home means you can save for a down payment, closing costs, property taxes, and mortgage payments. It also means not plunging yourself deep into debt after buying. Obviously, buying a home will result in some debt, but the key is to not become house poor. Being house poor means the majority of your income is dedicated to paying for housing costs. You should be able to manage the debt from your mortgage and be able to make your payments, and if this is the case, buying could be an option for you.
Renting instead of buying certainly has its perks, but buying can be the right move too. It all depends on your situation, your finances, and your preferences. If you have any interest in buying a home, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.