If you’ve never bought a home, you’re in that “first-time homebuyer” group, and there are thousands of articles and blog posts on the internet with advice for you. A Google search for the key phrase “buy or rent a home” will yield hundreds of thousands of results. Much of this information is of value, but you’ll have to do a lot of reading to get some of the information you want from one site, more from another, and yet more and different information from other sites. That can get unnecessarily complicated when all you want to know is whether you should buy or rent a home. In your search, you’ll likely have a few main things you are focusing on, home prices and what you can afford, how owning vs. renting works with your lifestyle, and most importantly how long you plan to stay in the home.
The Web has plenty of buy-vs.-rent calculators. With some basic input from you, you can get a basic idea of what you’d be paying for things like interest rate on a loan, local real estate taxes, mortgage costs and other economic factors to determine whether it would cost you less to own than to rent. If you’re looking for a good mortgage calculator to help you get a general idea of what it will cost to buy a home, Fortress offers one absolutely free of charge.
Although relevant to your decision, all of the information is based on the numbers for the day you do your calculation. But circumstances change — jobs change, compensation changes, taxes change (and almost never in our favor) — so it is a snapshot in time. Besides, it’s only one of many factors you should be considering.
The Pride of Ownership and Lifestyle Focus
When deciding whether to buy or rent, considering your current lifestyle and the lifestyle you plan to lead over the next couple of years is an important factor. Often times people don’t realize just how much work goes in to owning a home or how often things can break or need general maintenance.
Sure, you do have the American Dream of experiencing the pride of ownership. Yes, you can make modifications to your home to make it more livable for your needs. No, you can’t be forced to move because your landlord decides to move back in or to sell the home if you have an active lease. All of these are valid things to consider, but only in combination with the rent-versus-buy calculator results and other lifestyle factors.
How Long You’ll Own the Home
Depending on your down payment, the mortgage interest rate, and local costs of ownership, the time you will need to own a home before you break even will vary. There are real estate commissions and other closing costs involved when you sell. Take a realistic approach to evaluating your current employment, such as how much you like your job, as well as how much confidence you have in the stability of the company.
It could take from five to eight years or longer before you break even on costs, based on a conservative rate of inflation and value appreciation, along with many other variables. How long do you see yourself owning this house?
All of this is common sense, but it is not focused on any profit motive. Keep this information in mind when making a buy-versus-rent decision, and you’ll be better informed than the average buyer.