To Buy or to Rent? What You Need to Know
When you’re looking into moving homes, the age-old question is sure to come to light: should I buy or should I rent? The buy vs. rent question is one that we get a ton from both existing and prospective clients, and for good reason. After all, buying a home is a big decision… and, often, so is renting. There are pros and cons to both buying a home and renting one, and it’s all about choosing the right choice for you, your family, and your financial situation.
Wondering if you should buy or rent?
Here’s what you need to know to make the best decision for your next home.
First up: what makes the most sense with your finances?
The first factor to consider when deciding whether to buy or rent all comes down to your financial situation. While renting may be more expensive month to month, it doesn’t require things like down payments or ongoing maintenance costs. And, while owning may be less expensive month to month (and in the long run), it does require a down payment as well as a myriad of other, ongoing expenses.
When you’re buying a home, a down payment is essential in lowering your mortgage payments and getting a great interest rate — and we’d always recommend getting as close as possible to 15-20% down payment. There are also financial health checklists you’ll need to go through in order to get a loan, which includes having a manageable debt-to-income ratio and a good credit score, among other things. When you take your down payment and current finances and weigh it against other necessary expenses of being a homeowner (think: homeowners insurance, maintenance costs, etc.) you can make a decision that really does make sense. It’s important to consider every piece of the puzzle when choosing whether to rent or buy — since, while a mortgage payment in itself may be cheaper than rent, ongoing home ownership costs will often drive that number up.
Second, how long do you want to stay in the home?
Another important factor to consider when choosing whether to rent or buy a home is how long you want to stay in the home. If you purchase a home, it’s yours. You can stay in it as long as you want (and you’re also locked into your mortgage). However, when you rent a home, you’re at the mercy of the property owner — and you’re only guaranteed to stay for the length of your lease. If you’re wanting to plant down roots in a home that can be yours for a long time, buying a home is always going to be your best choice.
Third, do you want equity (and the responsibility that comes with it)?
The main difference between renting and buying is a lack of equity vs. having equity. When you buy a home, you’ll eventually pay that home off and have equity in it. You’ll be able to sell the home if you’d like, you’ll be able to rent it out, or you’ll be able to live in it as long as you’d like. However, everything connected to the home (from yard upkeep all the way to plumbing and foundation) is your responsibility. With renting, you’re giving a property owner money each month, but with no equity in the home. However, when renting, you’re not the one who has to pay for property upkeep and maintenance. It’s a tradeoff — and it’s worth putting in some real thought as to which trade you want to make.
The choice to buy or rent a home is only one that you can make, and making the right choice is essential in being happy with your housing situation. In the meantime, our team of lenders and professionals at VRM Lending are here to answer your mortgage questions — and we’d love to help you on your home buying journey.