Becoming a homeowner is a major milestone in life. Seeing the sold sign go up and getting your hands on those new keys is definitely an exciting moment. ( a “Blue Box” Closing! )
But let’s face it, the decision to buy a home can’t be taken lightly. To make the most financially savvy choice, you’ll have to weigh the pros and cons of renting and buying.
Here’s when it makes sense to rent:
You’ll only be in the area a short time.
Maybe you’re studying or on a short-term assignment. Or perhaps you’ve found yourself in a transition period in your life after finishing a degree, changing jobs or dealing with a breakup.
When you’re in an area for a short time (think 5 years or less), it’s less likely you’ll have time to build much equity in your purchase. Exceptions can be found in gentrifying areas - for those with an appetite for adventure and the stomach for it too! It can pay off big and fast, but can also be the first casualty of a market downturn. ( in which case, you are back to the 5+ year plan! )
You don’t qualify or have the budget.
If you don’t qualify for a mortgage loan yet, of course, it makes more sense to rent. But there’s more to factor into home ownership besides the sticker price. There’s also the cash down payment, property, taxes, maintenance, HOA fees and more. A reputable lender can help you fill in the numbers for your equation. If your budget can’t handle these expenses just yet, renting is the wiser decision.
You’re changing careers or not sure about your employment.
First things first. Build up your emergency fund before you go house shopping. If you don’t have your 6 months of living expenses saved or are in the middle of a job switch, renting is most likely the best option to meet your needs for the time being.
Here’s when it makes sense to buy:
You’re planning on sticking around.
You probably saw this one coming. If you’re ready to lay down some roots, buying a home is a good option. The longer you stay in your home, the more time you have to maximize your ROI. And if you have or are planning on children, the stability of “home” is one of the best things you can provide.
You’re looking to build equity.
Probably the most advantageous aspect of being a homeowner is the opportunity to build equity, something you definitely can’t do by renting. Plus the mortgage interest deduction helps lower your federal income taxes!
Take the difference between your mortgage loan balance and the market value of your home—you’ve got your equity. It can be applied to the next home you purchase or be borrowed against for a second mortgage or home improvements.
It’s all about making your home an investment that works for you.
You plan on investing in the value of your home.
While decorating your rental is fun, it doesn’t give you much bang for your buck. When you take on remodeling and maintenance projects for your home, you make your asset that much more valuable.
Bottom line: Homeowners have the opportunity to feather the nest and get back more than they put in.
In the market to buy? Start enjoying the pros of homeownership by contacting our team at eHomeHouston.
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