Ah, the age-old question. If you’re ready to move into a larger home or are relocating to a different area, you may be asking yourself whether it would be a smarter financial decision to rent or buy a new property.
Renting versus Buying: Which Is Best?
According to The New York Times, making the decision to rent will depend on a number of factors – especially how quickly rent prices rise and how long you plan to stay in a certain location.
As a rule of thumb, buying is a better decision than renting if you plan to live in a home for more than five years. After the sixth year of residence, buying becomes a wiser choice; it could cost you up to $10,000 less than renting with a total savings of close to $2000 per year.
Nonetheless, many potential buyers find it difficult to scrape together the cash for an expensive down payment for a home. This amount could be 20% of a property’s value, depending on the loan. When buying a home, you also have to take into consideration a number of costs that will be incurred at the time of closing, which could increase the initial investment even further.
Additionally, homeowners are responsible for yearly expenses, like Homeowner’s Association fees, renovation costs, and maintenance and upkeep expenses – not to mention a monthly mortgage. But if you’re settled in your area and plan to live there for five years or longer, it will all even out over time to save you money in the long run.
When Renting Makes the Most Sense
Before the fall of the housing market, owning a home was thought to be a wise investment. But after a number of foreclosures hit the market, many people opted to rent instead to protect their finances until the economy recovered.
Depending upon your circumstance, renting may make more sense if:
If you decide that owning a home is right for you, make sure to set aside extra funds for monthly and yearly maintenance that may include professional painting, landscaping, and household repairs.