Renting is a short-term solution to finding a place to live. It can be a good way to move into a new area and live inexpensively for a short period of time. But financially, renting doesn’t make much sense as a long-term plan.
Owning a home is a valuable asset–one that is likely to rise in value over time due to inflation and increasing land value. When you pay rent each month, your only return on investment is that you have a place to live. With home ownership, however, your mortgage payments go toward something you can sell later on.
Deciding if you’re ready to buy a house is not an easy task. Not only do you need to ensure that you’re financially prepared for homeownership, you also need to determine if it makes sense for your personal and professional life.
In this article, we’ll talk about some of the ways you can tell if it’s a good time to take the plunge into the housing market or if you should keep renting.
Where do you see yourself in five years?
Aside from being a question you’ll likely be asked at a job interview, this is also something you should ask yourself before considering buying a home. When you buy, you’re making a down payment, paying closing costs, and devoting a lot of time and energy into the process.
Initially, it typically costs more to buy than to rent. But, over time, you’ll likely end up paying less for your mortgage payments than you would for a 1-bedroom apartment. Furthermore, those costs go towards an important financial asset.
A big question you should ask yourself when deciding whether to rent or buy is how long you plan on staying in your next dwelling. Typically, if you plan on living there for over five years, it could be a good idea to buy.
To find out which makes more sense for you, try out this useful Rent vs Buy calculator.
What type of lifestyle do you want to have?
Owning a home means caring for a home. If you want to focus on your career or education, you might not have time or funds to pour into maintaining a home. It’s important to remember that home maintenance isn’t just a matter of mowing the lawn every other week. You’ll also have to be prepared to spend on hiring professionals for issues like plumbing and electricity.
Calculating whether it makes more sense to buy a home or rent an apartment can be difficult because there are a number of variables when it comes to buying a house. Closing costs, down-payment, property taxes, HOA fees, should all be figured into your calculations. On top of that, you’ll need to consider the state of the housing market, whether you can get a good interest rate, and what type of mortgage you can receive.
If you want to live in a large home and you want to do it sooner rather than later, you might want to rent and save for a longer period of time.
However, if you’re happy in a small house and don’t need lots of storage space and bedrooms, taking a small mortgage can be a good investment.
That’s a lot of variables to consider, but fortunately this calculator from the New York Times makes it easy to plug in your numbers.