For many people, owning a home is a major component of the American dream. It was long thought to be one of the best financial decisions a person could make. Recently, financial experts have begun to question if that is still true. Whether renting or buying makes more sense depends on many different variables.
Is it a Buyer’s or Seller’s Market in the Desired Location?
Whether the buyer or the seller has the advantage in a particular market can greatly impact whether or not it makes financial sense to try to buy in the area. Unfortunately, most areas are facing a large housing shortage. For those who live in large cities, it is even harder to find an affordable home.
How Long Will the Home be Lived In?
There are many “hidden fees” associated with buying a home. Things like closing fees can make it difficult to profit on the sale of the house if it is done within a few years. Anyone considering buying a home should ask themselves how long they want to live there. If the answer is a few years or less, renting may make more sense.
Is Renting a Waste of Money for the Individual?
Many people worry about “throwing their money away on rent.” In some cases, this may be true. For those who have poor credit scores, however, higher interest rates may mean they are not building equity when making house payments the way they think they are. When deciding what is more expensive in the long run, it is important to factor in things like maintenance, property taxes, and insurance. The best way to decide what makes the most financial sense is to look at the big picture. How much will it cost to rent or buy for the length of the overall stay is important.
Will the House Gain Value?
Houses are great investments, but putting all of one’s money in one area carries great risk. Although it is currently a seller’s market, that may not be the case when the time comes to move on. Also, the condition of the home will greatly impact its resale value. For some people, paying rent and investing money in a variety of stocks and bonds actually makes more financial sense.
Buying Vs. Renting
