Buy or Rent? The Best Answer May Not Be What You Think
- Is moving a part of your 2023 plan?
- Do you need to "right-size" due to a life transition?
- Are you looking to experience a different lifestyle?
- Unsure of what's the best way to go about it in the current real estate market?
Moving is always a big transition in life, but in today's market putting extra thought into deciding whether to buy or rent could save you money down the road.
Assess Your Financial Situation
Before you make a large financial decision (like the purchase of a home), you must assess your financial situation. Considering your financial situation could include looking at your income, your debt-to-income ratio, and your savings.
One general rule that some experts adhere to states that you should spend less than 33% of your monthly gross income on your housing costs. But the mistake that some people make when considering what their housing costs include is they only think about what their mortgage payment will be or what they will pay in rent. These are not the only housing costs to consider.
Estimate The Cost of Buying
You should also take these regular expenses into account when deciding if now is the right time to purchase a home. These expenses may or may not apply to a home that you want to purchase, so it’s important to do the proper research into each house you consider buying to get a more detailed estimate.
- Property taxes
- Down payment
- Homeowner association/Condo fees
- Homeowner insurance
- Closing costs
- Earnest money
- Mortgage interest
- Necessary maintenance
- Increases in utilities
You may have other expenses associated with moving that you may not have even considered when deciding whether now is the time for you to purchase a home. It’s important to know what all your homeownership expenses are before you sign on the proverbial dotted line and unknowingly sign yourself up for more expenses than you once thought.
Pros and Cons of Renting and Buying
As with any decision, there will be pros and cons to buying and renting. When making your decision, you’ll need to determine if the pros outweigh the cons and what is a priority to you at this stage of your life. Here are a few pros and cons for each to help you get started thinking about the positives and negatives that you might face as you decide to buy or rent.
Pros of Renting
- Fewer possible maintenance responsibilities/expenses
- More flexibility to move properties
Cons of Renting
- Rent prices could continue to rise
- Less stability
- Property management rules and regulations
Pros of Buying
- Could be tax deductible
- Perceived stability
- Potential to build equity
Cons of Buying
- Harder to move
- Home prices may decrease
- More responsibilities/expenses
Like with most major life events, it’s important to be fully informed before making a decision.
We are here to help. Before deciding to buy or rent, check in with us to talk through the impacts your decision may have on your financial plan.
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