Buying VS Renting: Which is Right for You
When it comes to finding a place to live, there are two primary options: buying and renting. Choosing between the two can have a big impact on your financial situation, and shouldn’t be a decision made lightly. Both options have their pros and cons, so when looking to move, it’s essential for you to weigh your choices.
Especially for younger people who are considering buying a home for the first time, understanding whether you are ready to buy (or if you should instead rent) can have a very large impact on your future. To help you out, here are some points to consider before you make a commitment.
What Level of Commitment Are You Actually Ready For?
Buying a home is a long term commitment, and many millennials might not yet be ready for that. Before making a decision, it’s important to analyze what your future goals and dreams are.
Purchasing a home brings stability and hefty dose of responsibility. If you are happy where you are, and you can achieve your goals in the geographic area you are looking to buy in, then getting a mortgage makes sense. With that home comes a very stable monthly payment that won’t rise every 6 months, and there is no worrying about a landlord evicting you with no warning. It’s a secure, long term, living arrangement.
Renting a place allows for a lot more flexibility with the future. Are you wanting to live in different places around the world? Potentially going to shift careers that might move you around? Not sure what you want in the future? Renting leaves you in a situation where the commitment is typically short term and flexible. Unlike a house, you can just up and leave after your contract is done. You don’t need to sell your home before moving, you can just pack up and be done.
Renting also can come with certain amenities you normally couldn’t afford in a home, especially with certain apartment complexes. These kinds of amenities could include a community pool, a game or entertainment room, or even a gym.
Who Takes Care of the Space?
When you rent a place, the landlord will set up rules regarding what kinds of changes you can make in your living quarters. This can include how you hang your pictures, whether you can paint the walls, and what kinds of renovations you can make.
With those restrictions comes extra benefits. Caring, maintaining, and fixing your property isn’t your responsibility. Yes, if you purposely cause damage like punching a hole in the wall, you have to get it fixed. But if your fridge breaks or the AC doesn’t work, it’s the landlord’s responsibility to pay and get it fixed.
Buying a home comes with extra responsibility but also more control of the space. Yes, if something breaks, it falls to you as the homeowner to fix it. That includes general maintenance like mowing the lawn and large projects like replacing a roof.
The positive side of homeownership is being able to do whatever you want with your home. You can paint the walls whatever color you fancy, decorate however you want, and do all of the drastic changes you can dream of. But keep in mind that you might have to eventually sell the place, and too many radical changes might hurt the value of your home or hurt your chances of finding a buyer.
Income, Credit, and Savings
There are a lot of different considerations that go into either buying or renting, but the largest is a person’s financial situation. If you don’t have the money to back it up, you can’t buy a home. Analyzing your finances requires seriously looking at what resources you currently have, and what your future could hold.
First off, if your income simply can’t handle a monthly mortgage payment, you should stick to renting. Typically, renting is less expensive than owning a home, partially because apartments and rentals are smaller than homes. Even though it is possible to get a rent cost higher than a mortgage, missing rent for a month has fewer major consequences than missing a mortgage payment.
Having a strong credit score is helpful in getting a mortgage with a lower interest rate, and in even getting a mortgage at all. If you have a weak score, renting can be a good starting point, along with utilizing credit cards, to helping build up your credit. For more information on credit scores and how they can affect your ability to buy or rent, visit our credit score resource center.
Finally, make sure to have enough savings for a down payment. If you don’t have a decent amount in your savings, and you wouldn’t be able to afford a down payment, stick with renting. But, if you do have a healthy savings account, you can transform that into an investment by buying a house.
As you investigate whether to buy a home or continue renting, remember that this isn’t a one time decision. Putting off buying a home because you are unsure about the future isn’t anything to be ashamed of. On the other hand, if you feel stable enough to buy a home, it’s a wonderful investment that can bring a lot of personal (and potentially financial) satisfaction. Just do your homework to find out what is right for you and your future.
Image source: https://pixabay.com/
Ben Allen is a freelance content creator and digital marketer who believes in helping small businesses succeed. He spends his free time bragging about his two daughters, eating stuffed crust pizza, and playing video games.
This post was updated December 20, 2017. It was originally published June 18, 2017.