Most young people begin their independent lives by renting an apartment or going off to college. As they build careers, save money, and start families, many may choose to buy a home. Or, perhaps small families looking to move up and expand or finally got that promotion. On the other end, some homeowners nearing retirement may choose to sell their homes to downsize, and become renters once more.
Buying instead of renting is a big step so it needs to make sense financially. You need to ask yourself a couple of things like, are you ready financially and emotionally? Do you have the skills it takes to manage a home? Buying a house involves raising money for a down payment and paying a monthly mortgage, which lasts anywhere from 5 to 30 years, depending on the home loan, the payment you can afford, and the down payment.
Know Your Responsibilities of Home ownership
Owning a home is a huge commitment so before jumping in, consider if you are ready to make several decisions, from picking an agent to picking paint colors. Are you confident enough to select a neighborhood where you’ll want to live for years? And are you up for devoting the time and energy to maintaining a home? Weekends will disappear under chores like pulling weeds, cleaning gutters, shoveling snow, and so on. Your home will require regular maintenance and repair, and there’s no landlord to call for help. You’ll need some basic handyman skills so you won’t go broke hiring a repair professional to fix every odd sound or smell. You are also responsible for anything that breaks. When renting, the landlord is responsible for a broken air conditioner or toilet. When you own the home, you must pay for and fix things yourself. You’re responsible for paying to repair any damage that isn’t covered by insurance. It’s not as easy as pointing to a house and saying I want to live there. You must be able take care of your home. Can you handle all the stress that comes with owning a home? Most people weigh the financial aspects of buying a house but one big factor to consider when buying a home is stress. If you lose your job, you can’t just switch to a less expensive apartment like you could when renting. You must make your mortgage payment, or you will lose the loan and after a certain period, the lender has the right to take your home from you.
The Downside of Renting
There might be a lot to ponder about when buying a home but the same goes for renting. When renting, you might also be limited to what you can do to the unit. Are pets allowed? Can you paint the place? Can you do this and that? Asking the landlord for permission on everything can be a grind and make you feel caged. Oh, and those rent payments never stop – sure, 30 years is a long, long time, but your lifetime will probably be longer. There won’t be any relief in retirement when you rent – you’ll keep paying your landlord for as long as you live there. And at the end, you won’t have anything to say for it, no home equity or ownership, despite all those payments you made month after month. Nothing to hand off to your kids or to sell for cash proceeds. Additionally, your rent can and will most likely rise, even if some level of rent control is in place. So, you might be paying less than your neighbor with the mortgage today, but if your neighbor’s mortgage is fixed, they’ll still be paying the same amount in the future while your rent shoots higher.
Points to Ponder
There are plenty of pros and cons to buying vs. renting, and vice versa. When you rent, you pretty much know what you’re getting into. You’re not going to make any money, but you’re not going to explicitly lose any either. And it’s mostly a hands-off type of deal. With a home, you’re making a bit of a bet on your future, and the future of the economy. After all, you need to put a certain amount down, and you need to ensure you keep making money so you can keep up with your mortgage payments. You’ve also got to set aside an emergency fund so you’re able to pay for repairs if and when necessary. So, make sure you think long and hard, maybe ask a few people you know who own a home and some who rent. Are you ready to move forward?