Your Next Move: To Rent or Buy a Home?

By Mason Cool – AVP, Mortgage Lender

Homeownership Versus Renting: Which Is Right for Me?

When planning to make your next move, timing is everything. But when is the right time to keep renting? And how do you know it’s time to buy? In short: it depends on your current finances, future plans and present mortgage market trends. To help get you started, here are three important questions to consider:

• Is there a chance you’ll change jobs in the near future?

  This could hinder the homebuying process as it’s important to have a history with a company, as well as a stable, predictable income throughout your home search – and through the closing steps. Job history, along with employment verification, credit score and debt-to-income ratio all impact the lending rates you will receive while closing on your home.

• What’s the most common way you spend your money?

  In other words, do you like instant gratification? If you prefer to spend your money on items that bring you immediate happiness (like purchasing a sweater that you’ll wear right away or a new couch that you’ll show off during your next gathering), it’s definitely an adjustment to turn around and spend on something like a home. For example, you may not consider fixing a water heater or investing in a new furnace as “fun” spending.

• How long are you planning to stay in your next place?

  If you’re planning to put down roots, then it may make sense to purchase your next home. Staying for the long haul has a ton of beneficial outcomes, including opportunities to support local charities, build your network and really invest the time with your current employer to work on professional development. It also helps if there’s a reasonable cost of living, low crime rates, good schools and vast community resources.

Ultimately, deciding to buy a home is one of the biggest financial decisions you will ever make. But fear not! We’re here to help you consider your best options. Let’s continue by examining some key factors:

Affordability.

Money is important to consider when deciding whether to rent or buy your next home. Ask yourself, can you afford to buy a new home? Here are some basic costs that would come with that decision:

• The down payment and closing costs
• Homeowner’s insurance and taxes
• Regular wear, tear and repairs
• Monthly utility bills

But there are also perks: When evaluating your current financial situation, remember that interest and property taxes may be deductible.¹ Also, as you pay down the loan principal, you’ll build equity – which can be an excellent asset for securing a different loan or line of credit down the road.

Additionally, most home values increase over time, which increases the amount of equity and your return on investment when you decide to sell your house. And – of course – once you pay the mortgage off, the home is all yours!

Flexibility.

For some individuals, renting may simply make the best sense because it offers increased flexibility in certain cases. There are a number of reasons for this, such as:

• Your initial cash investment would be much smaller – often a deposit of a month’s rent.
• The money you save each month could be used for other future investments.
• A landlord would be responsible for repairs of things like plumbing or electrical.
• If you end up changing your job or taking on the next adventure in a different community, renting makes it easier to move more quickly!