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As the housing market continues to recover, interest rates are projected to remain at their current historic lows at least until the end of 2014. Those low rates and the wide availability of vacant homes definitely favor buyers. But homeownership isn’t right for everyone. In fact, some former homeowners whose properties were foreclosed have vowed to never buy a home again.
If you’re trying to determine whether renting or buying is best for you, consider the following questions:
Where do you want to be?
Thinking about packing up your things and trying life in a different locale? Don’t even think about buying a house. The high cost of buying a home mean that if you sell your home within the first couple of years, you’re likely to end up losing money. It could take several years in your home before the purchase pays off, and some first-time homebuyer programs require that you stay in a home for a set period of time in order to receive certain benefits.
If you’re going to buy a home, you need to be reasonably confident that you are going to stay in one place for at least two years – the longer, the better. It’s impossible to know what the future holds, but if there’s a chance you will move in the near future, it might be wise to wait and see how things play out.
Can you cover the costs?
While most renters pay a deposit on their residence – and in some cases also pay first and last month’s rent up-front – buying a home requires a considerable up-front investment. You should be prepared to make a down payment, the amount of which can vary considerably depending on the home’s value, the market in which you’re buying and many other factors. Use a mortgage payment calculator to find out how the amount of your down payment will affect your monthly mortgage payments. Anticipate spending a few thousand dollars on the down payment, and be pleasantly surprised if it’s less.
You’ll also need to cover miscellaneous fees for title searches and closing costs, and while these costs – along with your Realtor’s cut – may be included in your overall mortgage, you’re still paying for them, even if that money doesn’t come directly out of your bank account
Homebuyers need to have extra funds on-hand — generally at least $1,000 – to cover inevitable repairs and maintenance that the home will need upon purchase.
Do you have a good credit score?
If you have already gone through the pre-approval process with a mortgage company, you’re probably aware of your credit standing. A low credit score can limit the home value you are approved for, disqualify you for some federal loan programs and lead to higher interest rate on your loan. Even a marginal difference in your interest rate can cost thousands of dollars over the life of the mortgage. In such circumstances, you may be better off by waiting to buy a home until you can rebuild your creditworthiness.
As a general rule, if you’re not sure you can afford a home, don’t rush into it. Home prices won’t be skyrocketing anytime soon, so a cautious approach is best.
Twitter: tricky_techno
i like to give on rent as whenever i need i can get it back…
mohit rajwani recently posted..Programming With C #2 Simple Interest
We have given our house on Rent and make quite a good amount of money from it though we had to face resistance from one of our tenants one time!
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This article makes me feel slightly less bad about my decision to continue renting, for now. People always toss around the phrase, “You’re throwing money down the toilet every month!” But, honestly, until I can be sure I’m living in a place that I truly want to settle down in, I feel like renting is not half bad!
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Some comments about buying vs renting that was not covered in the article. For example I bought my current home for 525,000 in 2004. I can sell it today for $499,000. On paper a $26,000 loss.
However, I was able to save over $33,000 using the mortgage tax deduction. So I actually made money owning my home.
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Good info. Definitely makes people reconsider buying as it is the “proper” thing to do.
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Yep !
I agreed if we are on buying then it is matter here that we are going to invest in proper Or it will be waste after some time.
For example,A man wants to gift his wife something precious then i think Gold,property investment can be good option because it a long time investment.
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Twitter: Elena__Anne
Great article. Buying a home can be a great decision, but it’s a big one and not one that should be taken lightly! Waiting a few years to make such a big purchase really isn’t a bad idea. Whether buying or renting, you’ll be paying money to live somewhere and you’ll have to invest a lot more money if you’re buying. If you change your mind or find that you can’t keep up, that could equate to a lot of wasted money! Another thing those thinking of buying their first home should remember is that they will be responsible for all of those little things – from the water/sewer bill to every broken appliance or plumbing problem – that a landlord would take care of in a rental.
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The way I see it, no matter how many people tell you that buying is so much better than renting, it really depends on your present situation and finances. I’ve been renting for most of my life, and it’s really the more practical choice for me due to my constantly changing career decisions and financial situation. Otherwise, I’d be looking at properties for sale right now.
My parents tried to get me to buy a home years ago because they said I was throwing my money away but I was so scared something may happen that I might not be able to pay for it, well, their home got foreclosed on. I still rent. I like the option to move if I want to though. It’s easy and less hassle.
Twitter: postboxesuk
Renting is a viable short to medium term option. Other than that, yes it’s dead money. When it comes to buying your own home, the hard and at rule of 3.5 times salary (combined if your married/living with partner) still applies, even when interest rates are at a historical low. You can’t afford more debt just because rates are low, without first weighing up living costs, especially with inflation the world over running at 4% minimum.
I go for rent as it is easy and not bound and can easily change the place whenever we want.
Great discussion mate.
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Hello there,
Fabulous post to save money which can be very prepotent in bad times so use them very carefully as i think.
Sometime we waste money on thing but don’t think about that and we have lost that precious thing.it should be properly managed.
I think warren Buffet’s life a prefect example to solve this type of bad habits and make a simple life.
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I prefer Buying a home and not renting it.The feeling of having a personal home is something which cannot replace anything.One can never rent for a long and after retirement he cannot afford to
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Home prices in many real estate markets are at historic lows right now. While it’s true that it can be more difficult to get a mortgage if you have low credit score, there are many State and Federal programs to help struggling homeowners keep their homes and allow eligible people become new homeowners. Check with a reputable real estate agent in your area for more information – getting on the property ladder, even in this economic climate, is not as difficult as you imagine.
Renting or buying. The need can be on of the consideration. If you only need for short time it better to rent. If you need for long term its better buy it.
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With interest rates as low as they are, it’s hard to pass on the chance to buy right now. If you’re reasonably sure you’re going to be there for 5+ years, I’d say buy. I could see prices going back down a little over the next couple of years as we fully recover, but they’ll bounce back, and you’ll be paying off principal at a low interest rate in the meantime.
Thanks for a nice article. I always prefer renting, but not taking a mortgage, cause it’s simply money you don’t have. We are all pushed into debts. This system works simply like this – to get you in debt as soon as possible (university loan, etc.). Too much weight on one’s shoulders to always owe somebody. I would only buy a house with money I actually owe. Until then – rent.
I don’t know what to say.
If you need a place to stay for a short period of time you’d better rent it but if you’re gonna settle down you really should consider to buy that place.
Great article.
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It’s a great time to buy if you have good credit. I found an old cardboard mortgage calculator from the early 80s and the lowest rate it went to was 10 pct. I think that says it all.
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Always buy. You just have to buy in the right situation. The tax benefits, ownership, investment…. on and on. Renting is throwing money away. You can NOT get that back. Yes in some situations renting is an ok option.
But that is just my opinion.
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Always always buy. Then again here in the UK just trying to get a loan is pretty hard unless that is you don’t actually need the money
I used to be a pretty good property developer, flipping 5-6 properties a year and then 4 years back no more development loans and the property business died a death – thankfully I saw it coming and retrained in web design, but heck I miss the huge figures we used to make in property.
If I had pockets of cash I’d be buying up as much property as I could though, especially repossessions at auction.
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Ultimately buying is the best option even if more money is needed. When money is scarce the mortgages are the best.
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My advice is to buy the property. Real Estate prices are at an historic low value now in the States, So buying now can be very lucrative in the future. More than that, renting is just spending your money – you don’t get anything out if it. When buying you have a property.
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I’ve never really considered renting for the long-term but I can see how it would be the best option for certain people. My current house payment is less than what I would pay for renting this house and if I can get it refinanced like I’m trying to do, it will save me about $300 more per month. The only way you’re gonna be able to cut your rent payment by $300 per month is to move.
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There are always two sides to any story, and its the same here. Renting is good for those who plan to move, dont have a secure job, dont plan to have a family soon or generally live a “free” life. On the other hand, renting really is throwing money out of the window as long as you can secure yourself a good loan and can find a valuable property for sale at a good price. To rent or to buy, it needs a deeper analysis of the person and his/her situation.
If you have got the money, buy. In these days you can make a good deal, because people can not afford a house anymore and want to sell it as quickly as possible.
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hmm nice idea… i will keep it in mind when i reach upto that level.
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Given that we can still write off interest, I’d say there is definitely value in owning versus renting. In fact, for this reason alone, some choose to not pay off their home mortgage. Not sure I would go that far, but in the end, it’s nice to be working towards building an asset, which you can’t get from renting.
I agree there are certain times when it might not make the best financial sense, and in particular, when the time you will be in a certain location is for sure going to be short.
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