When deciding on where your family is going to live the question of should you rent or buy a home frequently comes up. There are certain advantages and disadvantages to either renting or buying a home and it is important to analyze your situation so you can determine what is the best thing for your family.
What is Renting?
When renting a home you are paying for the right to use someone else’s property for a predetermined amount of time. The rental period can vary quite a bit depending on what the owner or manager of the property wishes. Rentals often require a deposit which the landlord retains and probably will require an additional deposit for pets. Sometimes rentals provide some of the utilities.
The Advantages of Renting a Home
The greatest advantage to renting is the maintenance should something go wrong. The landlord is usually responsible for taking care of all the major systems in the home. If the roof leaks, the landlord would have to repair it and not the tenant. The landlord is responsible for many of the costs associated with ownership.
Renters may also have flexibility since you do not have a home that needs to be sold before moving. Usually there will be a notification period that a renter will be required to give before vacating a residence. There may also be language in the lease that would require the renter to continue to pay rent until a new tenant is found if the rental period has not expired.
Buying a Home
When you buy a home you take on many of the responsibilities that renters do not have. The maintenance and repairs that are required on a home are your responsibility. If something goes wrong you have to cover it! Homeowners also have to pay taxes and insurance on the property. When you have a mortgage the taxes and insurance can be divided into monthly payments and paid into an escrow account so that when the taxes and insurance are due there are funds to pay for them.
Yes, You’ve Got a Mortgage
The mortgage is divided into several parts: principle, interest, taxes, and insurance. We mentioned the taxes and insurance so let’s talk about the other two. The interest is what you pay the bank for the service they provide in lending you money. The principle is your actual money going into your investment. That is what your new home is: an investment! Investing into home ownership is a significant advantage over renting a home. Your money doesn’t all go into a landlord’s bank account. The principle payments you make can be taken back out of the home when you sell. If your home appreciates in value (as they generally do) you may gain even more out of your home when you sell.
Changes can be Good
When you own a home you also have the ability to make changes without consulting a landlord. You may have a Homeowner’s Association, or city ordinances that have to be accounted for but for most things you get to make the changes on your home.
Consider the Cost
One major factor to consider is the cost. Due to low interest rates homeownership can be a huge advantage over renting. You can build equity and the lower the interest rate the more of your payment goes to principle to build equity in your home. Rental prices right now are soaring and often people are finding that the cost of buying a home is LESS than that of renting.
Should You Rent or Buy a Home?
If you need help in determining whether it is time for your family to rent or buy a home contact me. We’ll sit down and examine your situation and figure out what is best for your home situation!
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