Is it better to buy or rent a home? How does one decide whether to buy or rent a house now or later? Equity and total Costs are the main factors.
Is it time for you and your family to move into a new home? If so, you have two primary options. You can buy a new home, or rent a home.
Obviously, there are pros and cons associated with each option, as you’ll find at any crossroads. If you’re having trouble deciding which path you should pursue, we would like to offer our two cents.
Keep reading for a quick look at the benefits of each side of the argument.
Buying a Home Vs Renting a Home
When you buy a home, you need to find the best real estate agent to help you find a house you can feel good about investing in. They know the current local real estate market and have valuable real estate industry experience. They can help you find the right location and negotiate with demanding sellers.
However, you will pay handsomely for these services. Most real estate agent fees are 3% of the home’s sale price. Therefore, buying a home for $225,000 will cost an additional $7K in fees.
You don’t have to deal with any of this when you rent a home. You don’t have to worry about getting approved for a loan, hiring an agent, or negotiating with sellers. You shop around for your next home and apply with the landlord.
Equity
When looking at renting a home or buying one, you must also consider where your money is going. For example, you’ll make monthly mortgage payments when you buy a home. These payments, of course, go into your ownership of the home as positive equity.
Conversely, rent payments do not build personal equity in your assets when you rent a home. Yes, you’re paying for a place to live, but you will not see that money again.
Total Costs
Next, we must mention interest. Rent payments are interest-free.
Mortgages, on the other hand, come with expensive interest rates. Even super-low interest rates will add tens of thousands of dollars to your total house payment. For example, a 30-year, $250,000 mortgage with a 3.5% rate will cost you over $400,000.
Commitment
Finally, let’s discuss a scary word—commitment. When you buy a home, you’re signing a 15- —to 30-year contract.
In this contract, you’ll agree to make large monthly payments. The bank can take away your home if you struggle to make those payments.
Additionally, if you decide to move, it means selling the home. This requires making repairs, renovations, and updates. You’ll have to invest in cleaning, curb appeal, staging, and marketing
Alternatively, if you decide to rent a home, your only commitment is to the lease agreement. This can be month-to-month or several years. When you decide to move, you terminate the lease and move on with your life.
Of course, selling a house can earn you a lot of money. However, leaving an apartment does not provide extra income.
For more information, read this Joe Manausa real estate article about the fluctuating rates in the housing market. This information could prove vital to helping you make the right decision.
Will You Rent a Home or Buy One?
Buying a home could be a great decision for you and your family. Or you may be at a point in your life where it makes more sense to rent a home.
Regardless, consider your finances, lifestyle, and future plans to help you make the right choice. And if you’re looking for more real estate advice or financial tips, don’t go anywhere. Our blog was created to be a reliable source of information for people like you.
