The real estate market is hot, and your friends are purchasing homes. You’re probably wondering whether you should buy or rent a home. Your children need a playground, your dog needs a yard, and you wouldn’t mind owning an office and a garage.
But there’s a problem: You’re likely to relocate from time to time due to work, or you simply can’t afford a home.
Deciding whether to buy or rent a property comes down to several factors. Here’s a guide to help you make the right choice.
Should you purchase a home?
Owning a house is the American dream, and there’s no doubt that purchasing your own house and having your own address comes with a higher level of satisfaction and pride. However, this significant investment is linked to plenty of extra costs and it needs regular maintenance. This is the main reason you should be absolutely sure that you are ready to buy and maintain a home.
Here are a few things you should think about. If your answer to these questions is ‘yes,’ then, you are ready to take the plunge.
- Are you out of debt? Make sure you have cleared your student loan and you don’t have any consumer debts.
- Do you enough emergency funds that could cover three to six months of living expenses? Make sure if you got laid off, you have enough money saved to pay your loan and take care of a loan for 3-6 months.
- Have you saved enough money for a 10% to 20% down payment on a home? Remember, paying the required down payment means you don’t have to acquire private mortgage insurance.
- Will your mortgage installment take 25% or less of your monthly income? This would leave enough room in your monthly budget to achieve other financial goals.
- Do you plan to stay in the same location for three or more years? If you don’t intend to relocate, you can buy a home.
What if you find a good deal? You may have found the perfect home, and the seller is practically giving the property away. It could be the deal of the century, and you want to take advantage of it, right?
Well, I suppose you might be wrong. With real estate investments, you come out better off if you purchase the right property at the right time. It would be best if you never bought a home based on market fluctuations. Instead, buy a house when you’re ready financially.
Renting is a great option
Let’s get an issue straight: Renting a home isn’t a waste of resources. Giving your money to the landlord isn’t investing in homeownership, but you are definitely paying to live somewhere. That means your cash isn’t getting wasted. Here are some of the reasons you may want to consider renting a home.
You are paying off debt
If you have credit card debt and student loans, it may be best to rent an apartment. Unless your monthly rent is devouring much of your paycheck, renting an apartment could give you the chance to handle your debts and save cash.
Your job requires you to shift from one location to another
If you are in the military or you don’t intend to stay long in a particular location, it makes sense to rent an apartment. Remember, you shouldn’t purchase a property if you don’t intend to stay in a given area for at least three to five years, depending on the market.
You need more time to get your finances in order and make a plan
Purchasing a home is a long-term commitment. Thus, it would be best if you thought through your choices, and acting impulsively isn’t a good idea when it comes to real estate investments. If you just got married, graduated from college, or you are not sure about the specific neighborhood you want to live in, renting is a good option until you have a good plan.
Deciding whether to buy or rent a home isn’t an easy choice. Take the time to think through your options, and if you feel stuck, partner with an expert who can help you analyze your options. Remember, purchasing a home is a significant investment. One wrong move and you might end up with unmanageable debt.