If you struggle with whether or not you should rent or buy, keep reading before making a decision.
Why do some people prefer renting?
Buying a home is the biggest purchase a person will ever make, but it’s not just the mortgage makes it a huge expense. You have to factor in the cost of moving, property taxes, maintenance fees, homeowners insurance, and more. All of these things add up, especially if you don’t have a VA, USDA, or FHA loan. In some instances, however, you may find sellers who will agree to pay some, if not all, of the closing costs, which also helps buyers.
Renters, on the other hand, are usually only required to pay a security deposit. Some landlords need tenants to pay the first and last month’s rent in addition to the security deposit - which will be much less than buying. Granted, some landlords may require proof of renters insurance. Depending on where you are, you could pay as much as $258 annually (if you’re in Mississippi) or as low as $120 (if you’re in North Dakota).
Also, another perk of renting is that renters have the ability to move whenever they want once the lease is up. They aren’t bound to one house for a significant amount of time. Some landlords will even offer month to month leases or six-month leases, which is especially alluring for free spirits who get antsy or those who travel frequently for work, like military personnel.
Why might someone want to buy?
Unlike renting, owning a property increases your wealth. As a renter, you aren’t putting your money toward anything. You’re just padding your landlord’s pockets, and in some areas, monthly rent payments are just as, if not more, high as mortgages! Once that lease is up, you’re only going to walk away with your security deposit… if the house is in the same condition as when you moved in.
As a homeowner, the money you put into your home for repairs and upgrades increases the home’s value. And, as you pay off your mortgage, you’re gaining equity. In a way, your home is like a savings account because when the market prices increase, you can subtract your home’s value from what you still owe. Many times this is at a profit.
Other reasons someone would want to buy a house include increasing your credit score, tax benefits, and having the same monthly payment via a fixed-rate mortgage. As a tenant, your landlord can increase the rent whenever they want.
With that said, there are a few states that offer a tax credit to renters, but these credits cannot compare to the tax benefits homeowners receive come tax time.
How do I know if I’m ready to buy?
As much as we’d like to tell you that if you have enough money in savings for a down payment, it’s the right time to buy, it’s not that simple. There’s a variety of factors you need to take into when purchasing your first home. Including the following:
How long you’ll live in the home
If you can’t see yourself staying in one place for too long, you aren’t ready to buy because being a homeowner is a long-term commitment. You can’t just buy a house and move out in a year or two. Well, you could, but it’s not fiscally responsible for most people. Ideally, you’re going to buy a home and stay there for at least five years or more. If you’re buying your dream home, you’re likely to stay there for much longer than that!
Job stability is a big factor to consider when trying to decide to buy or not. People who move frequently (like military personnel) probably won’t want to buy a house because they could be told to move at a moment's notice. Most landlords have a section in their leases for military personnel, which outlines what the tenant must do if they receive orders to relocate. However, if you own a house and are told you need to move next month, it’s going to be a lot harder selling a home in such a short time frame!
Usually, people rent because buying a house is too expensive in some areas. This is especially true for the younger generation because they’re often stuck with high student loan debt, or it’s taking them a while to save enough for a sizable down payment.
However, if you have a decent amount of money in savings or are eligible for a federally-backed loan such as USDA, FHA, or VA loans and live in an area where houses are in your price range, then why wouldn’t you buy?
Are you ready for homeownership?
Being a homeowner takes a lot of dedication. You have to maintain your property and house. On top of the mortgage, insurance, and taxes, you have to pay for repairs on your own dime because you don’t have a landlord to take care of it for you. You have to be ready to deal with it all. You'll have to ask yourself if owning a home is worth it at this point in your life.
It’s okay to be nervous about buying, but if your gut tells you that you’re ready to make that leap, then go for it! Just be smart and ask around for reputable real estate agents in your area!
For more on COVID-19 and the real estate comeback, check out HomeLight’s Top Agent Insight Survey from Q2.
Other Helpful Huliq Real Estate Articles
Get more helpful home buying and selling advice in these previously published articles at Huliq.
What to look for in a neighborhood - see some of the vital considerations you should be thinking about when choosing a neighborhood to live in for the long term.
Things a first-time buyer should know - there are a ton of things you should know when purchasing your first property. Get four solid tips when becoming a first-time home buyer.
About the author: The above article on should you continue renting or buy your dream home was written by Maddi Arcurio. Maddi enjoys writing on all things real estate.