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Should You Rent or Buy? Why Owning a Home is the Best Option

    

SUMMARY: Wondering whether to rent or buy a home? This blog will help you ask the right questions so you can arrive at the right answer and start to build personal wealth.

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When it comes to making good personal finance decisions, there are some adages that almost everyone agrees on: Don’t take on too much debt. Pay all your bills on time. Make sure you have enough savings to cover emergencies. The choices you make in relation to housing also contribute to your financial situation — both now, and in the future. If you’re a renter, and you’re wondering whether or not you should purchase a home or continue life with a landlord, we have some advice for you. You can also check out some of our rent vs. buy calculators.

Renting Vs Buying a House: Practical Considerations

Money guru Dave Ramsey’s rent or buy advice always begins with what’s practical. If you’re in significant student loan or credit card debt, if you don’t like the area where you live, if you’re on a career path that requires you to move frequently (like being in the military) — don’t buy a house. Instead, rent and pay down debt, relocate to an area you like, and wait until your career allows you to settle down for a reasonable period of time. Then, you'll be in a good situation to consider buying a house.

Renting Vs Buying a House: Pros and Cons

Once your situation changes and you could potentially buy a house if you wanted to (i.e. your debt is under control, you know where you want to live, you have a down payment saved, you have an emergency fund, and your job is stable), you’re ready to tackle the question, “Should I rent or buy a house?” 

Renting Pros are Homeownership Cons

Renting does have its advantages. You don't have to worry about the expenses and stresses of homeownership: mortgage insurance, property taxes, homeowners insurance, home maintenance costs, homeowners association (HOA) fees, and the like. You can easily change locations at the end of leases or even get out of leases. When something breaks or needs updating, as a renter, you don't have to spend any time or money on fixes or updates. 

Then there's also the issue of buying a home. You don't just need a down payment to hand off to your mortgage lender. In most situations, you will also need a good credit score to qualify for a mortgage., and what type of mortgage should you get? A fixed-rate mortgage or an adjustable-rate mortgage? You'll also need to be able to cover closing costs, and your real estate agent will need their fee as well. In other words, buying a home has a lot of upfront costs that renting doesn't have. 

But there's a lot more to the story.

Homeownership Pros are Renting Cons

When you're renting from someone, it can seem like all you're responsible for is each month's rent, your security deposit, renter's insurance, and your utilities, and in many ways, this is true. But someone else owns the home or apartment you live in, and they're making mortgage payments, covering property taxes, and fixing the HVAC when it quits. Most of the time, they're able to cover their own monthly costs with nothing more than what you and other renters pay them. In other words, renters are often already covering the costs of homeownership — they're just doing it for someone else. And that someone else is building wealth instead of you.

This is just one of the advantages of homeownership — you're buying a house for yourself, not someone else. In addition, you also build home equity and receive tax benefits, and after some years of building equity, if you ever decide to sell, you'll almost certainly find that the value of your home has increased.  

Buying a House is Better Than Renting

While there are certainly good reasons to rent, it's in most people's best interest to get themselves into a financial situation where they could stop making rental payments and instead, make a monthly mortgage payment. Here at TDECU, we have a number of loan options available to first-time homebuyers and others interested in buying a home or refinancing the one they're currently in.

Reach out today to talk with one of our mortgage advisors.

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