From the time you were a little child, you probably heard everyone tell you about the benefits of owning a house. How it was all a part of the great American Dream. Now you are at a point in time in your life where you have started to think about whether you really want to buy a home.
While buying a home is the dream of many people, it is a HUGE responsibility. Many people experience buyer’s shock after signing the final mortgage papers as they realize that they now owe more than they ever thought possible and are going to owe for the next 30 years.
The fact of the matter is buying is not for everyone. You should take a close look at whether you should rent or buy before you buy your first (or even next) home.
The first thing to consider is how long will you be in the home. The general rule of thumb is that if you will be in the home less than 2 years, you are better off renting. The cost of financing a home and the cost of moving usually make buying a home that you will live in for only 2 years much higher than if you had rented.
Now, that being said, the next thing you should consider when deciding whether to rent or buy a home is what the local housing appreciation rate is. This is how quickly the value of the houses in the area goes up. The average is 2-3% a year, but if you find a house in an area where the appreciation rate is 10% a year, it may very well be in your best interest to buy a home, even if you won’t be there 2 years.
The best way to figure out if financially you should rent or buy is to use a try taking a look at either homefair.com’s rent vs. buy calculator or quickenloans.com’s rent vs. buy calculator. They will both essentially bring you to the best financial answer to you rent or buy question but they use different factors to calculate them.
Money isn’t the only factor you should consider when deciding whether to rent or buy a home. Personality should also be taken into account.
It is a basic fact that owned houses require more work and more time and have more hidden expenses than rentals do. Are you ready for that? If the water heater in your house blows, are you ready for the expense and hassle of replacing it? Are you up to spending every other Saturday afternoon in the summer mowing the lawn? Are you ready for all the extra stuff that comes along with buying a home?
It is a very legitimate question to ask yourself. Some people don’t want the hassles and that’s fine. Then chances are renting is the best option for them. Other people look forward to all the extras, both good and bad, that come with owning their own home. Be honest with your self in this area. It’s really difficult and expensive to get yourself out of a $150,000 mistake.
Whatever you decide to do, rent or buy, if you do so after looking at all the facts, you can rest easy knowing that you have made the right choice.