The decision whether to buy or rent a home is not easy. Some factors will play an essential role in the decision-making process. These factors include your budget, interest rates, the local markets, and tax deductions. Crunching the numbers will give you a headache since it is one of your most expensive purchases. Which is the best option? It all boils down to analyzing the determining factors.
What is your budget?
The first thing you need to keep in mind is your budget. Have you already figured out how much you can afford to spend? You will know your monthly budget when you calculate the amount of money that you bring in each month. Deduct the money you spend on essentials like transportation, clothing, and food. Whether you plan to rent or buy a home, the total housing costs should be around 28% to 30% of your gross monthly income. Never bite off more than you can chew.
What is the financial impact of renting or buying a home?
Once you have calculated your monthly budget, the next step is to make a comparison. You can run a price-to-rent ratio by dividing the home price by a comparable unit’s annual rent. Buying is a better option if the ratio you get is less than 20%. You will also have to factor in the interest rates as they are part of the home prices. You have a higher buying power if the mortgage rates are very low. However, you should also consider other factors when making rent vs. buy decision.
Find out how long you plan to stay in one location. If you plan to stay longer in a home, then it only makes sense that you own a home. There are also online calculators that can give you an idea about the actual cost of buying or renting a home. These calculators should include the selling costs, insurance, maintenance, and home price appreciation. The figures are not yet final, but they can give you a clearer financial picture.
If you are looking for wise investment, buying a home is a great option. When your mortgage has been paid off, you gain complete ownership of your home. You get higher returns when you sell your property at a higher price. You need to make sure that you understand the policy of mortgage payments.
Buying Vs. Renting
Buying your home means that your money goes directly to your property. Once you have paid off your mortgage, you can live rent-free, and you can even make a profit out of your home when the prices go up. There is no need to worry about house rules because buying a home allows you to live by your own rules. You can have as many pets as you like, or redecorate your home as you please. In the long run, buying can be cheaper than renting because you do not have to think about the monthly rental fee.
Renting has its benefits as well. For one, you can move house quickly when you want to. The process of renting a home is also less complicated than the process of buying. When the price of the property goes down, there is no need to worry about losing money. Your landlord will also be responsible for renovations and repairs.
Not sure whether or not you have a good investment? Carney Property will help you weigh your options.