While homeownership makes great financial sense for many Americans, in some cases, and for some people, renting a home or apartment is actually a better idea.
“While rent keeps increasing, mortgage payments have remained relatively stable in our area,” says Melissa Mason, Mortgage Banker with HomeTown Mortgage. “I encourage people that are interested in owning a home to meet with a local lender to look at their financial situation and discuss loan programs specific to their needs as there are a number of options available, particularly for first-time buyers. A knowledgeable lender can help guide you on whatever path makes the most sense for you.” Mason says.
How do you determine if renting makes more sense, at least in the short term? Following are some factors to consider.
Owning a home is a huge responsibility, and depending on your lifestyle, you may actually prefer to rent. Owning a home means that you are responsible for all of the repairs, yard work, and maintenance for the home. Depending upon your lifestyle, it may be in your best interest to rent.
In addition, if you think that you can’t commit to a specific location for a period of at least a few years, owning a home for only a short period of time may end up costing you money. Homeownership is best for those who will live in their home for at least a few years, because selling a home can be expensive due to potentially decreasing home values, closing costs, and Realtor fees. People likely to move in the near future are usually better off renting.
Where you live
If you live in an area where home prices are declining, it may be beneficial to continue renting until prices bottom out. In some areas, rental rates are much more reasonable than home prices, and renting may be the best financial option.
Your financial situation
Depending upon your financial situation, it may be beneficial to delay purchasing a new home. If your credit report and credit score are less than optimal, taking some time to fix your credit and improve your score is a good idea, and will ultimately save you money on your mortgage later.
When evaluating whether to rent or own, keep in mind that interest and taxes on the mortgage of a primary residence is generally tax deductible. This fact can make home buying much more attractive.
[callout]The Rent vs. Buy calculator helps you weed through the fees, taxes and monthly payments to help you make a decision between these two options.[/callout]