Should I continue to rent this year or make the leap into home ownership? For anyone who has debated this scenario you are not alone! As a real estate consultant I find this question is asked frequently, and quite frankly there is no right answer. When making a life decision of this magnitude I always recommend you weigh these three factors when making the decision to rent or buy.
- Financial. As you can see in the above chart buying a home is not always the most financially savvy decision, especially in the short term. If you are planning to sell within 1-2 years after your purchase it can be difficult to break even unless the market has experienced a sharp increase in that period. However, for a longer term purchase the financial benefits can be extraordinary. After only 7 years the average savings for a homeowner is over 20% of someone who is renting, and that is not even factoring in the equity being built in the property! When you rent the payments to a landlord will never end, but as a homeowner once your mortgage is paid off you will own the entire home free and clear. Not only that, but a landlord reserves the right to increase rent each lease cycle, while on the other hand your mortgage payments will always remain fixed!
- Mental. Buying and maintaining a home can be stressful. It is important to understand the responsibilities that come with home ownership as opposed to renting, especially when it comes to home repairs. Some people love the feeling of improving the property they own and take great satisfaction in taking some lessons learned from HGTV and applying them to renovate a new kitchen or bathroom. Others feel it is mentally burdensome and would rather have a landlord deal with home improvements or repairs. Regardless of what you choose, it’s good to consider the implications of what buying or renting means to your mental health.
- Flexibility. Want to adopt a new puppy from the local shelter? Have a new grill you want to fire up on the back deck? Many times renting can be restrictive and is not flexible for evolving life or family situations. While many of these rules or regulations are in place to protect both parties, it can be tough to undergo major life changes that all fit within the scope of a lease. The flexibility offered in home ownership is substantial and allows much greater freedom when it comes to making personal decisions (and who doesn’t love freedom, this is America after all)! As people get older, families expand, or you just want a change, the added benefit of being able to do what you want, when you want, can be the ultimate deal breaker.
Although there is no formula to decide what is the right decision, making an informed choice and weighing all of your options is a great way to get started. As someone who has experienced both I am more than happy to share my stories and help build yours!