Right now when the housing market is slowly recovering and interest rates are still near record lows, it might be the best time to consider becoming a home owner. Of course, depending on your financial situation, home ownership might not be the best choice for you. People have always debated whether it’s better to own a home or rent one, but the truth is that it mostly depends on each person or family’s budget, location, and future plans.
Owning a home can be as affordable as renting or even more affordable in some parts of the United States. The difference in price can be easily figured out by simply comparing mortgage prices to rental prices in your area. But even if renting seems cheaper, you will need to take into consideration all the advantages that home ownership has to offer.
Factors that Should Influence Your Decision
First of all, probably the most important factor that will influence your decision on whether to rent or buy a home is location. Prices fluctuate significantly depending on what area the home is located in. You might want to be closer to your job, which may make you look at homes in more expensive parts of the city or town. Prices for homes could be well out of your price range, so renting will be your only viable choice. Alternatively, you could move to a less expensive area, which will make your daily commute longer, but will give you the advantage of being able to afford buying a home.
Another factor that will have an impact on your decision is timing. You have witnessed the rise and fall of the real estate market during the past few years, and you have probably realized that buying a home has a lot to do with timing. Millions of people have lost their homes during the economic collapse because they became home owners before the housing market bubble burst. Interest rates also fluctuate, so buying when interest rates are low is a wise choice.
Last, but not least, one factor that should influence your decision is your financial situation. When analyzing your financial situation, you need to have a look at both your savings as well as your income and future earnings. This way you will determine if you are in a good position to become a homeowner, or if you should rent until you can make the necessary changes that will allow you to buy a home.
Pros of Owning a Home
Becoming a home owner is something that most people aspire to. Statistics show that home ownership in the United States is at nearly 70 percent, which means that it is a dream that can come true quite easily. Home ownership comes with great advantages that you won’t get if you rent. Here are some of them:
- Equity. When paying your mortgage loan, you are increasing your degree of ownership with every monthly payment. By paying rent, you are pretty much losing that money, as opposed to ownership where you can actually borrow against your equity to finance other purchases or refinance your home.
- Tax deductions. Your mortgage loan interest and property taxes are tax deductible, which will save you a significant amount of money each year. If you work from home, your home office and part of your utilities may be eligible for further tax deductions.
- Make changes to your home. When you own a home, you can decorate it any way you want. You can paint the walls any color you choose, hang pictures on the walls, and even add rooms or other structures to it. When renting, you can only make small modifications, and you will most likely need the building owner’s permission.
- Choose how to deal with repairs. Whether you can repair and maintain your home on your own, or hire a contractor, you can do as you wish, without being at the mercy of your landlord, as is the case with renting.
Pros of Renting a Home
Depending on many factors, renting could be a more viable option than owning a home. Here are some of the more important benefits of renting:
- Low upfront cost. When renting, you are required to pay the first and last month’s rent, and probably a security deposit upfront. There are no large down payments, home inspection fees, and closing costs, like when buying a home. The difference between the upfront costs of renting and buying can be as high as several tens of thousands of dollars.
- Easier to relocate. If you need to relocate for reasons such as a job change or divorce, you can easily pack up and move. Also, if your salary changes, you can easily move to a different area.
- Increase your credit score. A low credit score can get in the way of becoming a home owner, so renting for a while not only allows you to have a roof over your head, but it will also help increase your credit score and get back on the path to home ownership.
- No repairs and maintenance. If something in your rented home, like appliances or fixtures, stops working or breaks, you won’t have to replace it and pay for it. The landlord will take care of repairing and replacing things.
Both owning and renting have their advantages, but choosing one or the other will mostly depend on your budget and plans. Prices and interest rates fluctuate often and sometimes significantly, so buying a home at the opportune time will save you a lot of money and future headaches. Also, if you are not comfortable with the current housing market situation or your financial situation, then renting will most likely be the better choice.