This is probably the most asked question among potential homeowners. Should you buy, or you should you rent the property. For nearly a decade, the answer has been: buy. The crash in the real estate industry, combined with low mortgage rates, have enabled people to purchase a home at an affordable price.
But now, the situation has changed, the prices of the properties have gone up, as well as mortgage rates, which made millions of people reconsider their buying decisions. On the other hand, rents have increased by only 4%.
Therefore, we are going to answer some question and help you make the right decision.
Calculate the costs
There are various costs associated with buying and renting. For example, the vast majority of rental properties require a security deposit, which protects the landlord against potential damage. So, when you sign a lease, you will have to put down first and last monthly payment. Also, when assessing the rent, make sure to ask about utilities and whether they are included in the rent.
On the other hand, future homeowners are required to pay the monthly mortgage payment, which includes interest as well. Additionally, payments can go up or down, whether you have a fixed or adjusted mortgage rate. When trying to decide, compare these two amounts, and see which one is more affordable in the longer run.
Purchasing a house, you build equity
Homebuyers can potentially earn money since the value of property tends to increase over the years. At some point, you can cash out your investment. Additionally, with the fixed mortgage rate, you don’t have to worry about rising rents.
If you get pre-approved for a loan and manage to build some equity, then this makes more sense than renting.
Tax implementation is another thing to consider when buying a new home. First of all, you need to check whether you can deduct the mortgage interest at tax time. According to tax law, people who itemize their taxes can write off their mortgage investment payments. But, not everyone can apply these deductions. Based on the laws enacted in 2018, some people won’t be able to deduct most of their mortgage.
You need to realize that the house requires continuous maintenance and periodical investment. On the other hand, with rent, these costs generally fall to the landlord. For example, when you live in an apartment, if your refrigerator or HVAC system breaks down, the landlord needs to fix it, which isn’t the case with a house.
Consider your life goals
While we can’t predict the future, it’s crucial to evaluate your current life situation and how much it will change over time. For example, if you are going through a divorce, or you want to downsize, then renting might be a logical step.
On the other hand, if you are getting married, or planning to have a child, then buying a home is a better option than renting one. Also, think about whether you can afford a home that will fit your lifestyle.