When it comes to making the decision to buy or rent your next home, the answer isn’t always black and white. There are many questions you should ask yourself and the factors to consider before making this life-changing financial decision. To determine whether purchasing or leasing is right for you and your family, be sure to evaluate your current situation to see what financial responsibilities you are capable of handling.
Buying vs. Renting Your Home
Every family’s financial situation is different. What factors make it more beneficial to buy or rent your home? Learn how to best determine what is right for you with our tips below.
When Does it Make Sense to Rent Your Home?
You Have Limited Funds
One of the first things you should look into when thinking about buying or renting your home is the current amount of money that is available to you. If you are living paycheck to paycheck, it’s not the best idea to make a large financial change now. Without any savings or access to a lump sum, it is nearly impossible to buy a home. Additionally, if you currently have a lot of debt, it would be best to rent your next home until you can lower the amount of money that you owe. There is rent versus buy calculators available on the Internet to help you see what you can afford.
Your Long Term Employment is Uncertain
If your current job is a short-term work assignment (lasting two years or less), then it makes more sense to rent your home. You don’t know where your next work assignment will take you, and you don’t want to force yourself into an impossible commute. During this time, you can focus on conserving as much money as you can for purchasing a home in the future.
You are Unsure of Where You Want to Live Long Term
Just because you have stability in your job doesn’t mean that you will be there forever. If you are unhappy with where you are currently living, it would not make sense to purchase a home in that town. Unless you are certain you know where you would like to plant your roots, renting your home is the best option. In addition, if you are going through a life-altering transition that could affect your living situation, such as a divorce or death in the family, it is best to put purchasing a home on hold until your future has more structure.
When Does it Make Sense to Buy Your Home?
You Plan to Stay in it Long Term
Because buying and selling a home is a complex and extensive process, it makes the most sense to only purchase a home if you are committed to it long term. If you plan on living in your home for more than five years, buying may be the better option for you. Five years is usually the minimum amount of time needed to help you recover what you paid in transaction costs and receive a return on your investment.
You Have Substantial Savings
There are many additional costs for buying a home. Although these associated costs can be viewed as investments, if you cannot afford them right now, it is not the right time for you to buy. You will need enough money for a down payment (which traditionally is at least 20% of a home’s price), as well as money for maintenance, property taxes, and homeowners insurance, along with other ongoing costs. If you have enough savings, it is best if you purchase your home, so you build equity and do not feel like you’re throwing away money on renting a space that is not yours.
You Plan on Adding Your Personal Touch to Your Space
If you and your family are looking for a place that you can truly make your own, then purchasing a home may be the best option for you. Buying a home that needs a little work may be the smartest decision, because not only will it help you achieve the space you’ve been dreaming of, but also it could help you get a higher return on your investment, should you decide to move in the future.
Obtain a Mortgage Loan for Your Home
If buying a home is the best option for you financially, then you’ll want to work with an experienced mortgage company to make the process as simple as possible. Here at GuardHill Financial, we will support you every step of the way and help you come up with a budget for your mortgage loan that best suits your lifestyle. Are you ready to apply for a loan right now? You can apply online today! For more information about this process or to schedule a meeting with one of our loan officers, be sure to contact us. We are here to help you embark on this exciting journey!