The value of home ownership has been on a roller coaster ride the last few years, and in many ways it’s like looking at the seven stories Tower of Doom TM and wondering whether it will leave you smiling or woozy for the rest of the day. Should you get on the roller coast? Or stay on the teacups? Here are three questions to ask yourself when deciding between buying a home or renting one.
Q: How long do you plan to stay?
Most questions of renting and buying come down to the question of timing. If you plan to stay in an area or a home for a long period of time, you can buy a home knowing you have plenty of time to absorb any market drops. But bringing this to concrete numbers helps most of all—compare the average home price in your area to the average rental price, calculate in a down payment for your home purchase and a 5% increase in rental prices and the numbers should tell you how long you’d need to own a home before making it the more affordable option.
Q. What are your costs?
Both renting and owning carry hidden costs that we tend to overlook when comparing. For renters you need to think of the loss of home equity and home owner tax breaks. The offset is not being responsible for home repairs. For homeowners, you’ll deal with things like homeowner’s insurances, private mortgage insurance, property taxes and maintenance.
Q. Are you “throwing money away”?
We’ve all heard it when discussing the pros and cons of renting—renting is throwing money away. But building home equity isn’t the only way to make money. If you have any doubt about your ability to keep up with the cost of home ownership, or keep up with savings, it’s better to consider renting for the near future.
When having these discussions, remember you can always talk with your agent and walk through the decision together.
Photo by Cody Hughes @clhughes21